Hugo Boss: short-term pain for long-term gain says strategy update as it refines and elevates brands

Hugo Boss delivered a key strategy update on Wednesday with the German fashion giant saying its next phase aims to “realign, simplify, and strengthen the business”. 

2026 will be the “year of brand and channel realignment for long-term efficiency improvements”. But it’s clearly sacrificing sales and profits in the short term to achieve its long-term goals and added that currency-adjusted group sales and profits will both decline next year.

The refreshed strategy aims to “sharpen focus, discipline, and execution across the business”. It will continue to invest in the successes it’s seeing in Boss Menswear but it looks like elements of Boss Womenswear and Hugo remain works in progress with work going on to refine these areas. And it will “further elevate” its brands. It also looks set for more “selective” wholesale, more franchising, a more local approach to markets such as the US and China, shorter lead times and more use of AI.

The long-term aim is to “outgrow the market and drive EBIT margin to a level of around 12%”.

CEO Daniel Grieder said: “Since 2021, we have repositioned our Company with [the] Claim 5 [strategy], creating a strong foundation for the future. We have refreshed our two brands and invested extensively in our organisational platform. Following the successes of recent years, we are now deliberately taking a step back to prepare for tomorrow’s growth. Our focus in the coming years will be on the ongoing optimisation in the areas of brand, distribution, and operations with the clear ambition to transform them from great to excellent. Next to strong cash generation, this will drive sustainable profitable growth and long-term value for our shareholders. Our vision is clear: to be the premium, tech-driven, customer-centric global fashion platform.”

So the update strategy moves on from Claim 5 to Claim 5 Touchdown, “setting the course through 2028 and paving the way for sustainable, profitable growth. Amid a challenging market environment, this strategy builds on the successes of Claim 5 since 2021”. That success comes after its Boss and Hugo brands have both grown since Claim 5 was launched and made “global market share gains”.

So the strategic direction for them is unchanged, “but the focus sharpens. 2026 will serve as a year of realignment, strengthening the business by streamlining processes, refining assortments, and optimising the distribution network”.

The details

To deliver its updated strategy, the company “will centre on three key fields of excellence: brand, distribution, and operations [to] boost efficiency and set the stage for renewed top- and bottom-line growth from 2027 onward”.

It aims to “further elevate” Boss and Hugo, “strengthening brand relevance, and deepening customer loyalty”. While Boss Menswear “will continue to leverage its strong 24/7 lifestyle positioning, the company is improving the long-term performance of Boss Womenswear and Hugo”. 

The womenswear “will focus on a refined product assortment built around essential products, to strengthen resonance with female consumers. Hugo will sharpen its identity with a refined positioning and a more accessible product range centred even more on contemporary tailoring”. 

A new organisational set-up “with two dedicated powerhouses for menswear and womenswear will unlock synergies across the two brands” as well. 

Marketing spend is targeted at around 7% of group sales, with priority given to “high-return initiatives, including key partnerships like Beckham x Boss and product-led campaigns that drive conversion”.

The company also wants a “more targeted, higher-quality distribution footprint”. It will “continue to optimise its store portfolio for an even better customer experience while enhancing sales productivity and retail efficiency”.

In physical wholesale, it will “foster strategic partnerships, adopt a more selective assortment approach, and expand its franchise business”.

It will also “strengthen its digital business by further advancing seamless brand and customer experiences across platforms”.

Regionally, the company will “further build on its position in the US and China, with a particular focus on optimising its distribution and tailoring brand activities to local needs”. As for Europe, it will “leverage its strong presence [there] for further market share gains and it will also capture new business opportunities in emerging markets”.

Speed and efficiency

The operational excellence part of the update said it will drive further sourcing efficiency through “ongoing vendor optimisation, a sea-freight-first approach, and shorter lead times”. In parallel, the company will enhance its planning capabilities and enable faster, smarter decisions through technology and artificial intelligence”. It aims to maximise the benefits of its expanded automated logistics network and strengthen back-end efficiency through streamlined processes and automation too.

As mentioned, all of this will impact sales and profits in the short term. Hugo boss flagged its sales and profits guidance late on Tuesday ahead of the Wednesday update, but to remind readers, sales are expected to decline mid-to-high-single digits next year. EBIT should be between €300 million and €350 million in 2026 “as top-line development will outweigh targeted gross margin improvements and cost efficiency”. But a return to profitable growth is expected from 2027 onward.

CFO and COO Yves Müller expanded on what CEO Grieder had said, adding that “2026 will be a year of consolidation and realignment and an important step toward positioning Hugo Boss for long-term profitable growth. While we expect a temporary decline in sales, we will continue to drive our efficiency agenda along the value chain to safeguard margins and strongly accelerate cash flow generation. With this stronger financial foundation, we are well positioned to return to top- and bottom-line growth from 2027 onward and progress toward our long-term EBIT margin ambition of around 12%, reinforcing our commitment to delivering value to all shareholders.”