German luxury fashion group Hugo Boss announced the latest progress of the "CLAIM 5" strategy and raised its financial goals for 2025:
Sales revenue target raised to EUR 5 billion by 2025 (11% CAGR compared to 2022). EBIT (earnings before interest and taxes) of at least EUR 600 million and an EBIT margin of at least 12%. Offset additional business investment with higher gross margins. The cumulative free cash flow target for the period 2021–2025 is approximately EUR 2.5 billion.
So far, the "CLAIM 5" strategy has made the following progress:
Thanks to the acceleration of revenue growth after brand renewal, the market share of BOSS and HUGO has increased significantly. Significantly increased brand value, reflecting a significant increase in global brand relevance. Using different brand lines, we successfully created a "24/7 lifestyle brand" (a lifestyle brand that provides 24/7 wear). The launch of the digital project Hugo Boss Digital Campus has significantly enhanced data analysis capabilities. Best-in-class omnichannel experiences generate broad momentum globally. Initial progress has been made in establishing a state-of-the-art operating platform.
Daniel Grieder, CEO of Hugo Boss, said: "With Claim 5, we have introduced the right strategy at the right time. Thanks to the dedication and passion of our team, we have achieved an impressive recovery and a remarkable result. This will enable us to achieve our medium-term financial target of 4 billion euros this year, two years ahead of schedule. "We have everything we need to be successful, which is why we are raising our performance targets today, and we aim to achieve revenues of EUR 5 billion and an EBIT margin of at least 12% by 2025."
In order to achieve the financial goals for 2025, Hugo Boss will continue to invest in its business and strictly implement the "CLAIM 5" strategy. Against this backdrop, the Group is committed to making further progress on its five strategic propositions, capitalizing on global growth opportunities, and driving substantial improvements in revenue and profit in 2025 and beyond.
Claim 1: Elevating the Brand: Building on Strong Momentum to Further Drive Brand Relevance
Following a successful rebrand, Hugo Boss will build on the brand momentum of BOSS and HUGO to further strengthen its presence with consumers and drive brand power for years to come. In order to further increase brand relevance, especially among younger audiences, Hugo Boss will continue to pursue and develop a dual-brand strategy.
Furthermore, in the coming years, BOSS and HUGO will employ two distinct marketing strategies aimed at activating consumers at all touchpoints and maximizing consumer influence. Against this backdrop, the group will continue its successful digital-first marketing strategy, supported by star-studded events, strong collaborations, and unique brand campaigns. Therefore, Hugo Boss will continue to maintain its marketing investment between 7% and 8% of group sales until 2025 (7.9% in 2022).
At present, the Group's target is that by 2025, the sales of BOSS men's clothing will be about 3.5 billion euros (previous target: 2.6 billion euros), the sales of BOSS women's clothing will be about 500 million euros (previous target: 400 million euros), and HUGO's sales will be approximately EUR 1 billion (previous target: EUR 800 million).
CLAIM 2: Product Is King: Use Different Brand Lines to Create a "24/7 Lifestyle" Brand Image
Hugo Boss will continue to emphasize further enhancing the 24/7 lifestyle image of both brands, ensuring customers are perfectly dressed for any occasion. To achieve this, the company will continue to exploit the full potential of its sub-lines BOSS Black, BOSS Orange, and BOSS Green menswear collections and take advantage of the exclusive collection BOSS Camel, which will be launched in late 2022. Building on these successes, BOSS reintroduces the BOSS Orange collection for womenswear alongside the introduction of the BOSS Camel collection.
Therefore, from now on, products ranging from high-end tailoring to smart leisure and active lifestyles will be part of BOSS menswear and BOSS womenswear. In addition, with the upcoming HUGO BLUE brand series (pictured below) to be launched in early 2024, Hugo Boss will clearly seize the opportunity of denim clothing to further win the favor of Generation Z and young consumers. The two brands, BOSS and HUGO, will continue to maintain their superior price-value proposition, thereby establishing their unique positioning in the high-end/affordable luxury segment.
Claim 3: Digital Leadership: Leveraging Data-Driven Insights to Improve Efficiency
Harnessing the full potential of digitalization will continue to be a key driver in realizing the group's vision of becoming the world's leading high-end technology fashion platform. Over the past two years, Hugo Boss has made tremendous strides in further digitizing key business activities, from digital trend detection and product creation to AI-powered pricing and innovative experiences in the metaverse, setting the stage for further initiatives.
This year, the Hugo Boss Digital Campus (pictured below) was officially inaugurated in Porto, Portugal, which is also the core of the group's digital journey. By leveraging data-driven insights, Digital Campus will further drive efficiencies along the value chain while also supporting the goal of a seamless customer experience across all consumer touchpoints.
Claim 4: Omni-Channel-Driven: Leveraging a High-Quality Channel Mix to Drive Growth
Over the past two years, Hugo Boss has made substantial progress in translating its regained brand presence across all consumer touchpoints and delivering a best-in-class omni-channel experience to customers. Going forward, the company will continue to leverage its high-quality channel portfolio globally.
Physical retail: Hugo Boss aims to increase physical retail channel revenues to over EUR 2.5 billion by 2025 (previous target: around EUR 2 billion). The Group therefore plans to increase store productivity by at least 3% per year and invests EUR 600 million (previously target: EUR 500 million) between 2021 and 2025 to modernize, further optimize, and selectively expand the global retail footprint, including the launch of the latest, more digital BOSS and HUGO concept stores and the expansion of the Group's full-price store network to around 500 by 2025 (2022: 470).
Physical wholesale: At the same time, Hugo Boss will continue to consolidate its strength in the physical wholesale market. The two major brands have successfully increased their popularity and market share in major department stores in Europe and the United States. In order to enhance the business level in emerging markets, Hugo Boss will further strengthen the global franchise business, increasing the total number of full-price franchise stores from 300 to about 500 in the next few years. Overall, the group is currently targeting physical wholesale sales of approximately EUR 1.3 billion by 2025 (previously: approximately EUR 1 billion).
Digital channels: The digital business is expected to continue its double-digit growth trajectory in the coming years, with digital sales still on track to reach over €1 billion by 2025. Hugo Boss will focus on further driving traffic and conversions on the flagship store website while facilitating the growth of digital partners.
Licensing business: By 2025, the licensing business is still expected to contribute 200 million euros in revenue to the group.
In terms of regions, Hugo Boss will continue to drive its broad momentum across all regions, thereby further increasing market share by 2025.
EMEA region: The Group remains committed to taking full advantage of the strong momentum in the EMEA region (Europe, Middle East, and Africa), with sales expected to grow at a mid-to-high single-digit compound annual growth rate (2022-2025), exceeding EUR 2.8 billion, and expected to Strong contributions will be made from major markets and key growth markets, such as the Middle East.
Americas: Revenue is expected to grow at a high single-digit CAGR (2022–2025), reaching approximately EUR 1 billion by 2025. In particular, the group will continue to launch the "24/7 lifestyle" brand image in the important US market. In the past two years, Hugo Boss has achieved exceptionally strong development momentum in the US market with this brand positioning.
Asia Pacific: Revenue will grow at a low double-digit compound annual growth rate (2022-2025), and by 2025, the region's revenue share will expand from the current 13% to around 20%, which means that revenue levels will reach about 1 billion euros. In this regard, it will be of particular importance to continue to unlock the full potential of the brand in China. Additionally, Hugo Boss is equally committed to realizing its full potential in Southeast Asia and the Pacific.
Claim 5: Organized Growth: Building a Strong Operating Platform for Future Growth
Over the past two years, Hugo Boss has successfully transformed its operating model to a platform approach and implemented a streamlined, brand-led organizational structure to deliver profitable growth and ensure disciplined execution of strategy globally. In order to promote growth and further improve efficiency, the group will invest more in the supply chain.
Hugo Boss recently launched the important Digital Twin program, which aims to realize intelligent decision-making through a technology-driven business operation platform and better meet consumer needs in the future. While further improving the stability and transparency of its global supply chain, Digital Twin will actively contribute to the group's future growth, profitability, and sustainability goals.
At the same time, Hugo Boss is increasing its global logistics capacity by around 40%, planning to do so by moving production closer to the Americas and EMEA regions.
Beyond that, sustainable development remains at the heart of the "CLAIM 5" strategy and is essential to the group’s corporate responsibility and ongoing business activities. Therefore, Hugo Boss will further strengthen its efforts in this important area. As part of its sustainable development strategy, Hugo Boss will significantly strengthen its circular initiatives, use naturally positive materials, combat microplastics, and continue to promote zero emissions.
"Our 'CLAIM 5' strategy provides Hugo Boss with a strong foundation for sustainable, long-term success," said Daniel Grieder. "Thanks to our strong organizational structure, our strong commitment to sustainable With a highly motivated and passionate team within us, we are all even more confident in driving significant improvements in revenue over the next few years."
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