London

Upmarket retailer Hugo Boss AG’s new strategy is a sensible one. But, like its well-made yet safe suits, its plans could do with a bit more flair to solve the company’s problems.

New CEO Mark Langer has unveiled his blueprint for change as he affirmed a forecast for operating profit to fall in 2016 by 17-23 per cent. His strategy includes narrowing down the company’s range to just two brands: Boss, which will focus on high-end suiting and casual wear, and Hugo, which will be as much as 30 per cent cheaper than Boss, more fashionable and aimed at a younger customer.

The main push will be a return to its core customer, who it neglected as it was chasing sales of dresses, shoes and handbags to female customers. As part of this, investment, floor space allocation, and marketing spending will shift from womenswear, which accounts for just 11 per cent of sales, to menswear.

While this is certainly a move in the right direction, Hugo Boss still faces a considerable headwind: the majority of its sales are of apparel. Analysts at Exane BNP Paribas estimate that they account for over 80 per cent of its sales, compared with 55 per cent at Burberry Group Plc and just 16 per cent at Kering.

Across global luxury brands, apparel remains stubbornly weak, and men’s suiting is one of the most difficult categories. This is bad news for Hugo Boss. Within menswear, some 40 per cent is in suiting, with 10 per cent in shoes and accessories — one of the few areas of growth for global luxury.

The rest is in casualwear, and it wants to develop that even further. The Hugo brand should help that aim, especially given that it’s targeting millennials. But that rump of men’s’ suiting is a concern, and isn’t likely to ease given the relaxation of workplace dress rules.

Hugo Boss’s position as upmarket but not super-luxury is also a worry. The sorts of consumers that buy Hugo Boss suits will be just those fretting about how Brexit or a Trump presidency might affect their job prospects — hardly conducive to spending at least $500 (Dh184) on a new suit.

Langer says 2017 will be a year of “stabilisation” in the company’s fortunes, but it expects a return to growth in 2018.

However, that will depend on a smooth execution of the considerable changes he has planned.

There might also be some turbulence from making prices more consistent around the world. The company plans to lower prices in Asia and raise them in Europe, and its unclear how that mix of approaches will affect the volume of sales.

Curbing supply to US department stores will also weigh on revenue, and Langer expects to see a low double-digit drop in US wholesale sales next year.

And investors have honed in on one big issue: Langer’s promise of stabilisation implies flat profits in 2017. That’s squarely at odds with the current consensus of analysts forecasts for Ebitda to rise about 5 per cent.

When it comes to fashion, there’s a risk in safety.

— Bloomberg