Boss man prays for bankers to keep jobs

Everything has to be just so for Claus-Dietrich Lahrs, but sometimes reality interrupts. We are whizzing from Wentworth golf course in Surrey to Stratford in east London, when his BlackBerry starts buzzing. It's his 14-year-old daughter calling from school in Germany.

She is having problems with her maths homework. And now her dad — the chief executive of Hugo Boss — has a problem, because he doesn't know the answer.

Lahrs hangs up and stares at the numbers scribbled down in front of him. Still nothing. As we pass Tower Bridge, he looks out of the window and something twigs. He calls her back with the solution.

Order is restored and Lahrs, 49, is happy again. His fiercely packed schedule is running to plan. He spent the day at Wentworth with Hugo Boss's senior managers, and then squeezed in our interview during the car journey between the golf course and the new Westfield shopping centre, where there was a party to mark the opening of a Hugo Boss store.

The blessed order, however, doesn't last. Two hours later, he is hosting a dinner for fashion editors at the Shoreditch Town Hall, a trendy hotel in east London.

It seems everything is going to plan. Lahrs gives a brief, to-the-point speech, the starter of crab croquette with sorrel arrives promptly — but then disorder rears its head again. The steak arrives tepid. The Brits politely tuck in, but Lahrs sends his back to be heated.

The lukewarm steak, though, was a small matter compared with some of the issues that have been upsetting Lahrs's ordered universe since he joined Hugo Boss in August 2008. So regimented is his world that he doesn't like to mix his professional and personal life; for that reason he wouldn't tell The Sunday Times what his favourite film, music and gadget were, or where he last went on holiday.

Until Hugo Boss, Lahrs's career had been a smooth ascension to the top of luxury's gilded tree. He started at Cartier, part of the Richemont group, before moving to Louis Vuitton in 1997. He spent 12 years with the French luxury group, ending up as managing director of Christian Dior and was one of Bernard Arnault's key lieutenants.

In 2008, Martin Weckwerth, a partner with Permira, the British private equity group, approached him about a job. The year before Permira had paid ¤780 million (Dh3.78 billion) for a near-30 per cent stake in the Valentino Fashion Group, which owns the Italian label Valentino and a majority stake in the German-listed Hugo Boss.

For Lahrs, it was a chance to go home. He swapped Paris for Metzingen, a leafy, affluent town 32km outside Stuttgart in south-west Germany. This is where Hugo Boss has been based since it was founded in 1924, and it remains the town's biggest employer.

Great timing

If Lahrs hoped for a return to a gentle, bucolic German life, he was in for a shock. One month into his new job, Lehman Brothers crashed — and much of Hugo Boss's customer base of professional men and women found themselves facing redundancy overnight.

"It was great timing," he says, cracking a rare joke before getting serious again. "I would say everything changed, and it changed in a very much unexpected way. It was difficult to prepare for because it just happened — even the summer of 2008 was great."

Yet Lahrs refused to hit the nuclear button. He would not discount stock (a Hugo Boss suit starts at about £500 and can go up to £1,500) or sanction his partners, such as Harrods and Selfridges, to slash prices. "They were left with masses of stock and they must live with it," Lahrs said. "We don't allow discounting. If somebody starts a discount during the season he will get a fine."

Orders plummeted in the first half of 2009. Sales fell from ¤1.6 billion in 2008 to ¤1.5 billion the next year, and earnings (before interest, tax, depreciation and amortisation) fell ¤5 million to ¤267 million. It was largely bad timing, but Permira, the company's red-faced new owner, was not content to sit back and wait for the economy to improve. Lahrs was mandated with reviewing the entire cost structure of the company and its retail portfolio.

The business, like most premium brands, had relied on wholesale for generating the bulk of its turnover. The proportion of sales through this channel was about 70 per cent when Lahrs joined in 2008, but after the sharp fall in orders in January 2009, he decided to make the business less vulnerable to the whims of department stores and franchise partners.

Today the company's own retail operation — 600 stores around the world — accounts for almost half its revenues compared with just under a third in 2008. Like Burberry, this was helped by buying out franchise partners in China, Germany and Britain, where it bought back 15 stores that were part of Moss Bros.

"We were a wholesale company with some retail, and now we are a serious retail player," says Lahrs. This gives the company greater control over its order book, but also allows it to dictate the look and service within the stores — in short, it allows the group to present the image it wants.

For Lahrs, that image is increasingly becoming one of high-end luxury but "without saying bye-bye" to the core business of premium menswear. Take the new store in Stratford. Lahrs is keen to point out that it is different from the "very ‘high street' character inside the mall". This, he adds, is very important.

Straight to the top

He sees Burberry, Polo Ralph Lauren and Tommy Hilfiger as his main rivals and dismisses the threat of local players such as Reiss and Ted Baker. "We have the real advantage that we can speak globally. That makes a big difference."

In China, the image is deliberately upmarket. "The Chinese customer goes straight to the top," Lahrs says. This is where Selection, the group's most expensive sub-brand, is strongest. A Selection suit can cost up to £1,500 compared with £500 for a Boss Black.

Sportswear, under its Green label, is also doing well in the Chinese market, where items such as ties, belts and knitwear are popular gifts in corporate and government circles.

Lahrs's strategy is paying off. Last month, the group announced a 19 per cent increase in 2011 sales to just over ¤2 billion; earnings rose 34 per cent to ¤469 million, helped by efficiency gains. He has raised group sales projections from ¤2.5 billion by 2015 to ¤3 billion.

Weckwerth of Permira, who is also a member of the Hugo Boss supervisory board, said: "Claus has proven to be a great choice as a chief executive for Hugo Boss. We are fully backing his vision and growth plans for the business."

Lahrs has an ambitious plan to open about 50 stores a year over the next three years. Almost half will be in China, with the rest in Europe and America. As well as opening in Stratford late last year, Hugo Boss now has a store in Aberdeen and is scouting for a new London site for its upmarket Hugo brand.

As he did with his daughter's maths homework, Lahrs has dealt deftly with the firm's trading and operational problems. Philipp Wolff, a company colleague, said: "Claus knows what he wants, but he also really listens. He encourages his colleagues to express their opinions and is always open to other people's ideas and their valuable suggestions.

"His approach mixes being authoritative with a willingness to provoke reactions from those around him. He really changed the management culture at Hugo Boss to a very modern and open one."

Nowhere has Lahrs been more open than in facing down the hitherto unspoken problem of Hugo Boss's links to the Nazis. Before Lahrs joined, it was known that the company had made uniforms for the Third Reich's army, but reports were varied and light on facts.

Lahrs commissioned Roman Koster, a German author, to write a history of Hugo Ferdinand Boss and his company from 1924 to 1945. Lahrs makes it clear that although the company financed the study it had no influence over the content, and the result - the company has an abridged version on its website — is testament to that.

The book reveals that Hugo F Boss, the founder, was a member of the National Socialist party, a supplier of party uniforms and a beneficiary of 180 forced labourers during the World War.