Hugo Boss sees sales stabilising in 2017, will make online push for revival

Hugo Boss said on Thursday that improving its online business will be a top priority this year as the struggling German fashion house hopes to avoid another decline in sales and cement a recovery in China, where it managed to turn its business around after slashing prices there.

Luxury players such as LVMH, Cartier owner Richemont and British brand Burberry, have also signalled better demand in mainland China in recent months as well as improving tourist spending elsewhere.

Since taking over as Hugo Boss chief last May, Mark Langer, the group's former finance chief, has been cutting costs by renegotiating rents, shutting stores, trimming brands and shifting marketing spending back to menswear.

He is returning Hugo Boss to its roots selling smart men's suits, reversing the course of predecessor Claus-Dietrich Lahrs who sought to make the premium label more of a luxury brand and invested heavily in promoting its womenswear.

Lahrs quit last February after sales slumped in China and the United States.

Hugo Boss said it had saved more than 100 million euros (86.68 million pounds) in costs and investment in 2016 and it would continue to keep a strict control on expenses in 2017, helped by renegotiated rents and the closure of loss-making stores.

Langer has also slashed prices in China to bring them closer to European and U.S. levels, helping sales there rise by almost 20 percent on a like-for-like basis in the fourth quarter.

Hugo Boss said it expected currency-adjusted sales to be stable in 2017 after it reported a 4 percent fall in 2016 to 2.69 billion euros ($2.8 bln), with online sales down 9 percent to 76 million euros, less than 3 percent of the total.

It expects net income and earnings per share to rise by a double-digit percentage rate in 2017 after net income fell 39 percent to 193.6 million in 2016.

ONLINE PUSH

Analysts expect online transactions to represent 20 percent of all luxury sales within a decade, up from 7-8 percent now.

"Online and retail stores must be more closely linked together," Hugo Boss's sales chief Bernd Hake told journalists.

The company plans to roll out services like "click and collect" to stores across Europe by the end of 2017.

Ecommerce sales at Hugo Boss were disrupted in 2016 by a move to fulfil orders in Europe itself, instead of via a partner, and the relaunch of its website, but the company said they should return to growth during the course of 2017.

It also plans more digital marketing, forecasting it will spend 70 percent of its budget online and only 30 percent on print in 2017, compared to a 50-50 split two years ago.

Digital communication had been an important driver of its recent recovery in China, it said, noting a big jump in followers on Chinese social media sites WeChat And Weibo in 2016.