Hugo Boss moves production closer to home to shorten supply chain

German fashion house Hugo Boss is expanding production capacity closer to its base in Europe to reduce its dependence on Southeast Asia at a time when global supply chains are under strain. strong pressures.

Managing Director Daniel Grieder, who aims to double sales to € 4 billion per year by 2025, told the Financial Times that supply chain disruptions are creating “incredible challenges” for Hugo Boss and his staff. rivals, with supply shortages, delays and higher shipping costs.

The company was expanding its factory in Izmir, Turkey, in response, Grieder said, adding that it wanted to hire nearly 1,000 more workers there, thus increasing its workforce by a third. He also planned to invest more in machinery and tools at the site.

Grieder also pledged to end the years of “hibernation” of the company, which, under its former ownership of British private equity firm Permira, tried unsuccessfully to transform itself from a premium brand to a brand of luxury.

Grieder told the FT he would expand the brand’s product portfolio and offer more casual and leisure wear in addition to its flagship line of business wear. It has planned 500 million euros of investment in stores over the next five years and plans to increase the marketing budget by 100 million euros per year until 2025.

The Izmir factory, which dates from 1999, is already Hugo Boss’ largest production site and is traditionally used primarily for the manufacture of formal wear. The company also has sites in Germany, Poland and Italy, which together with Turkey account for around 20% of its clothing production. Another 30 percent of its clothing comes from suppliers in or near Europe. Hugo Boss said this share will increase further in the years to come.

Much of the industry relies heavily on production in Southeast Asia, where labor costs are much lower.

Grieder, a 60-year-old industry veteran who was poached by rival fashion label Tommy Hilfiger, said the change would be permanent. “Our future strategy is to produce even more clothing close to the markets where it will be sold.”

Products for the Americas would be made there, as well as for Europe and Asia, he said, adding that it would be a “huge change” for the company.

In the past year, the company has already reorganized its production in Izmir and now also manufactures swimwear, womenswear and other clothing there. Grieder said that a proprietary factory close to Europe had been “a huge competitive advantage” in recent months.

The company also plans to relocate some of its production to “urban factories” in Western countries and, in the first quarter of 2022, will begin testing the final production of jeans and denim at a small factory in Los Angeles.

In the third quarter of 2021, Hugo Boss increased its sales by 40% year-on-year, while revenue was 7% higher than in the third quarter of 2019, before the pandemic. Last year sales fell 31% to 1.95 billion euros and the company recorded a net loss of 219 million euros.

Grieder said demand for formal wear, which has been hit hard by lockdowns and the huge increase in working from home, has rebounded more strongly than expected, thanks to pent-up demand linked to postponed events such as weddings .

According to Grieder, the company was concerned that sales of formal wear such as traditional costumes could fall by 50%. “It didn’t happen and we are very happy about it,” he said.

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