Hugo Boss leaves only part of the business in Russia

Some international apparel manufacturers that announced a suspension of operations in 2022 were not ready to completely abandon the Russian market. Germany’s Hugo Boss has decided to focus on wholesale supplies and is considering selling its remaining stores in the country. The vast majority of Western fashion retailers have already decided on the fate of their business in Russia, and among the undecided, there are mainly premium brands, including Hugo Boss.

The German concern Hugo Boss AG has decided to reorient its business in Russia to wholesale supplies and is negotiating the sale of its assets and liabilities in the country, according to the company’s report for the first half of 2023. A Kommersant source in the commercial real estate market also knows about the plans of the fashion retailer to switch to wholesale deliveries and transfer business in Russia to a partner.

The press service of Hugo Boss told Kommersant that the company is currently “reviewing its business structure in Russia and is looking for a solution that matches the concern’s business model.”

Hugo Boss is a major German clothing manufacturer. According to the annual reports of the Russian division of the company, at the end of 2022, Hugo Boss Rus managed 19 stores in Moscow, the Moscow region, St. Petersburg and Rostov-on-Don. According to SPARK, the revenue of Hugo Boss Rus for 2022 decreased by 17% year-on-year, to 6.3 billion rubles, the loss amounted to 26.2 million rubles. against a net profit of 406 million rubles. a year earlier.

Until 2020, Hugo stores were launched by the Russian Trade Management LLC (it develops in the Russian Federation, in particular, Lady & Gentleman City, Armani Exchange networks). At the same time, even after the decision to independently develop business in Russia, Hugo Boss did not abandon the partnership with the distributor.

The Trade Management presentation for the first quarter of 2023 states that the company operates three Hugo stores, and the Hugo and Boss brands together occupy 17% in the distributor’s sales structure. Trade Management declined to comment.

In March 2022, Hugo Boss AG announced the suspension of retail operations and online sales in Russia. At the same time, the company did not suspend trade through wholesale channels, which is confirmed by the data of the Federal Accreditation Service: during 2022-2023, the company received declarations of conformity for men’s and women’s clothing and footwear. Given the current Western sanctions, Hugo Boss is able to continue wholesale deliveries, but, like all public fashion companies, it had to stop investing in development in the Russian market, says Marina Malakhatko, senior director of CORE.XP.

The Hugo Boss brand is in demand in the premium fashion segment and has always shown a good level of sales, so the opportunity to continue cooperation at least through wholesalers is used quite successfully, says Anna Mankova, Senior Director for Agency Services of the Commercial Real Estate Department of the Commonwealth Partnership.

Among other retailers, the American manufacturer of clothing and footwear, VF Corporation (brands Vans, The North Face), has reoriented its Russian division only to the wholesale direction. In addition, as Kommersant’s sources said earlier, the Russian office of the Puma sports brand can also concentrate on wholesale deliveries (see Kommersant of June 26).

However, when deciding to leave only wholesale deliveries, it is difficult for the manufacturing company to control the uniformity of prices, the quality of service and sales, Marina Malakhatko notes. Therefore, the expert assumes, the brand will partially lose its position in the premium segment market.

Alexey Vanchugov, Managing Partner of Vanchugov & Partners, adds that having your own retail outlet makes it possible to approximately double profits. In his opinion, it may not be profitable for a fashion company to completely leave the Russian market, since it will not be able to control the process of supplying official brand goods. And this threatens the growth of counterfeit brand products on the market, the expert adds.

In general, according to CMWP, by the beginning of 2023, about 85 Western brands announced a change in the status of their business in Russia. At the same time, by the middle of this year, 70% of such international brands have made the final decision to leave the Russian market or stay, another 30% have not decided – these are mainly premium brands.

Alina Savitskaya