Fashion Industry Excess: 'Creative Types Live in Extremes'

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SPIEGEL: Mr. Lahrs, the once-celebrated Dior fashion designer John Galliano has been on trial in Paris since last Wednesday for allegedly making anti-Semitic remarks. On Friday, Prada raised €1.5 billion ($2.14 billion) in its IPO in Hong Kong. Are these the two extremes of your industry: glamorous delusions of grandeur and the greed for very large sums of money?

Lahrs: Both events are exceptions to the rule -- both good and bad. IPOs like Prada's don't happen every week, unfortunately, and they have nothing to do with greed, but rather with a clear expansion strategy. And excesses like Galliano's are, thank God, also rare.

SPIEGEL: Before you came to Hugo Boss in 2008, you were the head of Dior Couture for five years, which meant that you were Galliano's direct counterpart in management. Did you clash with him at the time?

Lahrs: No, because at Dior I already knew that there are times when a manager should allow a designer to work in peace. Galliano is a great artist. And a great deal more attention is being paid today to certain labels and their creative talents. Not everyone can handle it equally.

SPIEGEL: Galliano says that he should not be held accountable because of his drug addiction. Would you have thrown him out?

Lahrs: A label like Dior could not tolerate his anti-Semitic remarks.

SPIEGEL: Conversely, that means that drug problems are sometimes tolerated in your business, though.

Lahrs: I wouldn't presume to cast judgment in this particular case. But one shouldn't forget that the environment of an artist like Galliano is more receptive to some temptations than that in which we managers work. That's where these creative types, who tend to live in extremes, get some of their inspiration.

SPIEGEL: It sounds like a very polite way of saying that sex, drugs and rock 'n' roll are simply part of the fashion business.

Lahrs: Let me make one thing clear: I strongly condemn drug abuse. But just think of rock stars. Not everyone in the music industry lives a regulated, eight-hour-a-day professional life. In return, they provide us with moments of brilliance.

SPIEGEL: Was the suicide of top designer Alexander McQueen last year just a private drama, or was it also a sign of growing tension among creatives?

Lahrs: I can't comment on the motives for his suicide, but McQueen was certainly exposed to a lot of stress, because he was constantly in the public eye. He was the head and face of his brand.

SPIEGEL: Your designers, on the other hand, are almost unknown. Does this anonymity help them survive?

Lahrs: We want the focus to be on our brands more than anything else, which is why we don't have one celebrity designer who bears the full burden of responsibility. That's our philosophy.

SPIEGEL: But you too have stepped up the pace and increased the pressure, adding more fashion lines and setting ambitious goals. Your aim is to increase revenue to about €2 billion this year. Instead of two collections, you will now be coming out with four new collections a year.

Lahrs: There will indeed be four a year in the future, and they'll become increasingly similar in terms of their relative importance and their share of revenues. But this doesn't translate into more stress in terms of development, provided there is coordinated interaction among the departments. It's often just a matter of minor adjustments. Men's shirts, for example, are not subject to any particularly dramatic revolutions.

SPIEGEL: With collections changing more frequently, you and the other luxury brands are running after budget giants like Zara and H&M.

Lahrs: Your comparison falls short, because companies like that always offer products for only a month. The products are sold and then the next delivery arrives. Brands like ours cannot and do not wish to work like that. But the business has become incredibly dynamic, which means that we have to be able to react quickly to trends.

SPIEGEL: Just how quickly?

Lahrs: We're already at the point where, at the end of the 2011 summer season, we can start working on the collection that will be displayed in stores next summer. Nowadays there are only nine months between the idea and the shelf.

SPIEGEL: Your principal owner is the private equity firm Permira, which also invests in other luxury brands. Why is the volatile fashion business still so exciting for investors?

Lahrs: Because it really isn't all that volatile at all. Setting aside the fluctuations in the global economy, our industry is relatively stable. The market continues to grow. And the luxury brands clearly distinguish themselves from the mass-market business. This approach continues to promise respectable returns.

SPIEGEL: Your lowest-price Boss suits are now selling or €399 ($570) in Germany…

Lahrs: … but our emphasis is above €500.

SPIEGEL: Globally speaking, however, the pricing of your suits varies considerably. Where are they the most expensive?

Lahrs: They average €1,000 in China at the moment. Customers there tend to go for extremes -- either very inexpensive or very luxurious. We are only interested in the premium segment, and custom-made products are also popular. But even in France we sell 50 percent higher quality…

SPIEGEL: In other words, the price depends less on quality than on the market…

Lahrs: …and the brand's image.

SPIEGEL: Would that mean that you have the worst image in your home market, of all places, because you're forced to sell your suits at the lowest prices here in Germany?

Lahrs: That's a fallacy. All surveys indicate that we have a first-class image in Germany, and it's no coincidence that Germany is still our biggest market -- though a highly competitive one. Retailers have trained consumers to be a little too cheap. This doesn't just apply to the fashion industry, but also to food retailers and the car industry.

SPIEGEL: Boss has even made cheap warehouse sales socially acceptable, particularly here in the company's founding city of Metzingen, which has turned into something of a giant outlet store.

Lahrs: But that's a completely different issue. You're talking about the sale of products from past collections.

SPIEGEL: Although Boss is seen as a very German brand here in Germany, it produces most of its products in other European countries, Turkey and Asia. How do you explain this contradiction?

Lahrs: Is it one? Our high-quality shoes are made in Italy, for example, which can only be good for quality. But the production capacities for many product lines are simply no longer there, even in Europe.

SPIEGEL: You aren't seriously claiming that the only reason you are no longer manufacturing in Germany is that there aren't enough seamstresses here?

Lahrs: Labor costs do play a role, of course. It simply doesn't add up. But you mustn't forget that we produce custom-made suits here in Metzingen.

SPIEGEL: So is Boss a German brand or not?

Lahrs: Globally speaking, it's more of a European brand. In New York, Moscow or Shanghai, Boss isn't perceived as being nearly as German as you think.

SPIEGEL: When women buy a Boss dress, are they buying into a different attitude towards life than men who buy Boss suits?

Lahrs: Well, we got into women's fashion later on…

SPIEGEL: … and were long unsuccessful…

Lahrs: Wait a minute! We earn more than €200 million in revenues with women's fashion today, and we're growing steadily. This is substantially more than some of our competitors who sell only women's fashion. Nevertheless, perhaps it is true that women are more interested in change when it comes to fashion, which is why they must constantly be appealed to in new ways. That's exactly what we have on the radar.

SPIEGEL: You already have about 550 Hugo Boss shops worldwide. That must be expensive.

Lahrs: But there's no other place where we have such direct contact with our customers. No trend indicator is as fast and reliable as your own store. That's why we plan to open about 70 new stores a year worldwide.

SPIEGEL: An important indicator is annual sales per square meter of selling space. Boss reportedly achieves an average figure of about €6,000, compared with €20,000 for Louis Vuitton. Why the sharp difference?

Lahrs: Our numbers are now higher. Louis Vuitton also has the advantage of making a lot of money with relatively small bags.

SPIEGEL: In the past, the rule of thumb was that the more expensive the brand was, the smugger the sales personnel would be.

Lahrs: I hope that's generally a thing of the past nowadays. Ultimately, everyone is fighting for market share, so there's hardly any room left for arrogance. Besides, everyone knows how difficult it is these days to size up customers when they walk into a store.

SPIEGEL: You mean that it's no longer possible to recognize the affluent simply based on what they're wearing?

Lahrs: There's a lot of room for error. If you take too long to approach a customer, he might think you're arrogant. If you ask him what he's looking for too quickly, he might think you're being pushy. But it usually works out pretty well in our stores.

SPIEGEL: You, at any rate, are always dressed to the nines. Does your wife set out your clothes for you in the morning?

Lahrs: I do it myself. But I know that there are also executives who need help in this regard. And why not?