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Hugo Boss Dusts Itself Off


Marketing

HUGO BOSS DUSTS ITSELF OFF

It will forever be remembered as the uniform of chic Wall Street investment bankers. The square, broad-shouldered look defined the upwardly mobile 1980s, and in the process it made an international fashion superstar out of German menswear maker Hugo Boss. But when excess gave way to austerity, Boss got tossed. Just as customers began turning their backs on the boxy look, a series of management miscues and an overexposed label piled on to cost Boss its cachet.

Now, Boss is suiting up for a comeback. In the little more than a year since he took over, Chief Executive Peter Littmann has split its venerable lineup into three collections with a wider choice of fabric, cut, and price to attract a broader pool of working professionals (table). Littmann, a marketer and fashion-industry outsider, is now backing that up with a $30 million global marketing blitz and faster response to customer demands. And even as Germany continues to struggle with some of the world's highest wages, Littmann has largely cleaned up Boss's cost problems by aggressively moving production outside Germany.

TOUGH TESTS. As a result, the sales boost that Littmann expects from the new collection "will go straight to net profit," says Katharina Stroh, textile analyst for Schruder Munchmeyer Hengst & Co. in Frankfurt. The early reviews are good: On Apr. 11, Boss announced that 1993 profits jumped 10%, to $29 million, before a one-time tax benefit, despite sales that slipped 7.8%, to $498 million. Investors are even more confident, boosting the share price to $591, up 158% from a four-year low reached last year.

Still, Littmann's strategy is facing some tough tests. He may be taking a big risk by refusing to go down-market and by limiting distribution of Boss's three new lines. To prove his strategy works, Littmann "needs good results quickly," says Leo Pesch, editor-in-chief of Manner Vogue.

So far, Littmann has pleased buyers Boss had been disappointing. When Guenter Lorentz, chief buyer for the Dusseldorf-based men's retailer Peek & Cloppenburg, recently asked for a wider selection of cotton overcoats, Littmann delivered within six weeks.

Such improvements are particularly satisfying for the 47-year-old Littmann, who has risen on his knack for creative marketing. As a 20-year-old, he fled Czechoslovakia just weeks before the Soviet tanks rolled in during the Prague Spring of 1968. After holding jobs as diverse as equipment hauler and TV producer, he made his mark as a marketer for a German carpetmaker. He transformed wall-to-wall broadloom into an art-world happening by cajoling artists such as David Hockney and Roy Lichtenstein to design for him.

At Hugo Boss, Littmann faced a creative challenge of a different stripe. The company began flailing about in 1989, when the grandsons of the founder abruptly sold a 63.7% stake to a Japanese textile baron. Employee morale nosedived, and lack of direction from Tokyo persuaded several key people, including the chief financial officer, to abandon the company. Even Werner Baldessarini, then an 18-year veteran and Boss's chief designer, was negotiating to join a competitor.

CARPET CAPER. That began to change in December, 1991, when Italian textile giant Marzotto bought the Japanese stake, dumped Boss's failing U.S. retail business, and in a single year slashed materials costs by 17%, personnel costs by 18%, and debt by half. Chairman Pietro Marzotto also persuaded Baldessarini to stay. And having heard of Littmann's carpet caper, Marzotto decided to risk going with a fashion-industry outsider as CEO.

As soon as he took the helm early last year, Littmann energized the staff by giving them just 90 days to present customers with the three collections. He closed a German plant and set up production in four Eastern European countries. The result: a halving of the German share of Hugo Boss production, to 20%. To help expand overseas sales, he opened regional offices in Hong Kong and Budapest. Now, 60% of sales are outside Germany, up from 25% in 1984. By decade's end, he aims for 75%.

In the cutthroat fashion world, even achieving those goals won't guarantee that Hugo Boss will find its former prestige. But if Littmann wins the marketing game, Boss of the 1990s will no longer represent a lost generation.Karen Lowry Miller in Metzingen, with Silvia Sansoni in Rome and Laura Zinn in New York


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