The Boss Behind Boss
November 1 1996 by Judith Rehak
THE BOSS BEHIND BOSS
CEOs tend to be a well-dressed lot, but Peter Littmann is more so than most. At a recent meeting in New York, he was the epitome of Eurostyle, clad in an impeccably tailored, double-breasted gray suit, blue-and-white striped shirt, and discretely patterned yellow tie.
To be sure, wearing his product is a requisite of his job. He’s chairman and chief executive of Hugo Boss AG, the upscale menswear company based in Metzingen, Germany.
Style is only the most visible aspect of running a successful global fashion business, and Littmann faced some daunting challenges when he was brought into the 70-year-old firm in 1993 by Marzotto, its Italian majority owners. Inflated labor costs in Germany were making inroads into profitability; the company’s American operation was awash in red ink; and, not least, the popularity of the Boss power suit, a Yuppie fashion icon in the ’80s, was fading.
Littmann lost no time in swinging into action. To revitalize and widen the appeal of the Boss brand, he split it into three separate labels, each targeting a different lifestyle. Within a year, customers could choose among: “Boss,” a conservative, but softer look for work and leisure; “Hugo,” for the trendier customer; and “Baldessarini” (named after Boss’ chief designer Werner Baldessarini), a high-end line featuring exquisite fabrics and extras such as hand tailoring.
“Many people in the trade were quite skeptical,” says Littmann of his bold concept. But risk-taking is not unfamiliar to the 48-year-old, Czech-born executive, who fled to Germany with $10 in his pocket after the “Prague Spring” collapsed in 1968, and rose to senior positions in the carpet and porcelain industries.
At Boss, his daring has paid off. Customers as far a field as New York, Tokyo, and Moscow are snapping up the three labels, even at a pricey $700 or $800 for a Boss suit and $1,400 or $1,500 for a high-end Baldessarini. “It’s been a successful marketing device, making all three brands look young and dynamic,” says Adrien Hopkinson, an analyst with WestLB Capital Management, noting that Hugo Boss’ share price has nearly tripled to 1,730 deutsche marks (roughly $1,130) since Littmann’s arrival.
Littmann’s success, however, is the result of more than marketing prowess. By shifting 20 percent of Boss’ 40 percent production base in Germany to Eastern European countries with skilled, but low-cost, labor, such as the Czech Republic and Slovenia, he has slashed costs by a whopping 50 percent. (Littmann points out that each garment is returned to Germany for inspection before it goes to a retailer.) The move also has helped Boss compete with Italian archrivals such as Giorgio Armani, which have benefitted from the weak Italian lira.
The U.S. picture has brightened, as well. After a costly, two-year restructuring, Joseph & Feiss, the company’s Cleveland subsidiary, is back in the black. Last year, it made 80 percent of the $66.6 million worth of Boss menswear sold in the U.S.
The improved cost structure and growing global expansion-63 percent of Boss sales are international-is evident in the company’s bottom line. Despite stagnant consumer spending in Germany (its largest market) and sluggish economies in other European countries, sales for the first half of this year rose by a healthy 7.9 percent over a year earlier to DM452.4 million ($296.5 million), while net income was up 5.5 percent to DM30.9 million ($20.2 million).
Littmann now is turning his marketing strategy to the U.S., Boss’ second largest market, orchestrating an $8 million marketing campaign that includes an arts partnership with New York City‘s Guggenheim Museum. Of 40 new franchised stores to be added to the company’s global network of 158, 10 are slated for the U.S. by the end of 1997. Sales per square foot range from $800 to $1,400 a year, but analysts note approvingly that the richest margins are generated by independent franchised stores. Most American sales currently come from high-end retailers such as Saks Fifth Avenue and Bergdorf Goodman.
Given the brutal competition of the fashion industry, Littmann must maintain his dual role as savvy marketer and watchdog of top quality for acceptable costs. Analysts already are fretting about the effects of inevitable wage increases in Eastern Europe on margins. “As long as they’re giving us the right costs, we’ll stay,” responds Littmann, who notes pointedly that, except for its German and Cleveland facilities, the company does not own its factories.
“It’s easy to do wonderful things if you don’t care about price, but I’m not interested in that,” he adds. “I don’t want to produce only for the rich. That’s boring.”
Chairman and Chief Executive
HUGO BOSS AG
Birthplace: Prague, Czechoslovakia.
Education: Engineering, University of Bratislava; Doctorate in Business Management, University of Cologne, Germany.
Interests: Contemporary American art (favorite artists are Roy Lichtenstein, Cy Twombly, Jasper Johns); teaching business management and marketing at the University of Cologne and University of Witten-Herdecke.
Cars: Company car-Mercedes; personal car-Gray Porsche 911 convertible.
Philosophy: “Money isn’t everything. Today, having money does not make me more happy than when I didn’t have a car and only one pair of shoes.”