Pre-recession, you'd never hear high fashion uttered in the same sentence as commercial appeal, but the flagging economy humbled even the most haute houses of style. Consider Hugo Boss (BOSG). The German luxury group's name was synonymous with high-end, sharply tailored men's apparel long before Mad Men dictated a resurgence of slim silhouettes. But by broadening its offerings to entice consumers in new markets, Boss boasted a record year in 2010 and predict double-digit growth in both sales and earnings this year.
Boss logged an impressive sales increase of 7 percent to â‚¬1.7 billion ($2.40 billion) last year, boosting net income by 82 percent. This was undoubtedly good news for the group, which had seen virtually every number on its balance sheet take a hit in 2009 as the luxury market slumped.
Despite significant layoffs and tight cost control, Boss' management stuck to a comprehensive strategic realignment implemented in 2009. Two measures in particular allowed the group to sail on profits while others struggled.
Separate lines, one sustainable brand
Boss Group has five labels in its portfolio, including its core brand BOSS, BOSS Black, BOSS Selection, BOSS Orange, BOSS Green, and HUGO. While the apparel ranges from classic to casual, overall Boss has remained true to its combination of sophisticated designs, exclusive materials, and quality tailoring -- even though some of the labels tout price points that fall into the affordable rather than premium category (think a BOSS Orange dress shirt that'll set you back around $125 vs. one from Gucci priced at $340).
Gucci attempted a similar foray into the aspirational category in order to appeal to a broader range of customers. However, the venerable Italian luxury goods group miscalculated its approach to brand management. The sales boost from less expensive, aspirational products was short-lived and the brand fell far short of its $3.9 billion goal with 2010 sales coming in about a billion dollars short. CEO Patrizio Di Marco pointed out that shoppers in Gucci's namesake stores (which account for 70 percent of the brand's sales) were choosing cheaper, double-G emblazoned items over designer Frida Giannini's collections, which eroded the brand's style and exclusivity.
Balancing accessibility, affordability and avant-garde style
Boss never lost sight of its roots in quality, but it did swing to more classic, commercially appealing designs for four of its brands. Meanwhile, management kept the HUGO collection cutting edge. As the group's nod to high fashion, HUGO's definitely got a more avante-garde assortment than the others.
But Boss' philosophy is much like the uber-successful Burberry. CEO Angela Ahrendts leaves design in the capable hands of Christopher Bailey, chief creative officer, who's successfully navigated the line between commercial appeal and covetable on-trend edginess. Bailey's given plenty of leeway to experiment with the brand's Prorsum collections, which are heavy on the fashion cred, however light on revenues.
Contrast that with Alexander Wang's core men's collection. The mÃ©lange of fabrics, fits, and forward-thinking concepts have already garnered the designer a pile of industry accolades. But Styleite rightly points out it may be difficult to translate the runway to reality. Hordes of guys may not be eagerly snapping up suit pants made of sweatshirt material, for instance.
Boss' strategies have positioned the group for profitable growth so far. Now as the economy continues to rebound, it's poised to ride a rising wave in new markets. Sales in the Americas gained 22 percent to $505.5 million, while Asia-Pacific sales surged 40 percent to $305.9 million. Things are only likely to get better.
Image via Boss