For Hugo Boss AG investors, 2024 is a year to forget. The German fashion brand’s shares are down almost 40%, on track for their biggest decline in 16 years, lagging rivals like Burberry Group Plc in an already bad year for fashion retailers. 

Chief Executive Officer Daniel Grieder issued his first profit warning mid-year, citing a glum spending outlook. The executive, who had revived sales by luring younger shoppers, is under scrutiny. And UK retail tycoon Mike Ashley, who has a track record of trying to shake up retailers he views as under-performing, may look to place an executive on the board.

Since Hugo Boss — a premium brand that Grieder revamped — cut its operating profit and sales outlook in July, it’s become one of the most shorted stocks among European luxury peers.

Shares out on loan, an indication of short interest, represent almost 14% of Hugo Boss’s free float, according to the latest data from S&P Global Market Intelligence. 

Pink Skirts

Grieder’s efforts to lure younger shoppers paid off initially, but as Hugo Boss started pushing out items like a sequined pink mini skirt that costs €169.95 ($178), it has exposed itself to a more price-conscious customer. 

“This clientele is probably hit harder by the challenging macro environment,” said Cedric Rossi, an analyst at Bryan, Garnier & Co. “The more high-end you are, the better it is at the moment.” 

Inflation has strained shoppers, affecting even the most exclusive luxury brand owners like LVMH. Some 70% of those surveyed by the Business of Fashion and McKinsey & Co. said they will continue to shop at off-price retailers and outlets over the next twelve months, according to the firms’ The State of Fashion 2025 report. 

“The brand turnaround remains a work in progress,” Swetha Ramachandran, a fund manager at Artemis Investment Management, said in an interview. 

With some €1.8 billion wiped out from its market value this year, Hugo Boss shares are now so low some analysts say it could be time to buy. The stock trades at about 11 times expected earnings, according to data compiled by Bloomberg. That makes it about 15% cheaper than Europe’s benchmark Stoxx 600 Index. 

The shares also have the greatest return potential among European peers like Burberry, according to twelve-month price targets compiled by Bloomberg.

However, the near future for Hugo Boss and Grieder could be complicated by more than just cash-strapped customers.

Billionaire Ashley’s Frasers Group Plc raised its stake in July. Ashley is not afraid to push for changes — as the boards of Mulberry Group Plc, Boohoo Group Plc and Norway’s XXL ASA know well. Hugo Boss said by email it’s “taken note of” Frasers’ interest in a seat on its supervisory board. 

Frasers is Hugo Boss’s second-largest shareholder behind Italy’s Marzotto family, whose history with Hugo Boss goes back more than three decades. 

Board Move

“We think Frasers will be looking for a seat on the supervisory board at Hugo Boss’s AGM in May,” RBC analyst Manjari Dhar wrote in a note. Frasers didn’t immediately respond to a request for comment. Marzotto could also raise its stake, according to Hauck & Aufhaeuser analyst Christian Salis.

Grieder is also facing a potential regulatory investigation over media reports alleging he was involved in insider trading activities. The company believes that no legal violation took place, a spokesperson said.

The firm’s supervisory board expressed confidence in the CEO after conducting an external legal analysis, which concluded that the suspicions were unfounded. But German regulators could still open an investigation. BaFin, the country’s financial watchdog, declined to comment. 

“With questions over the quality of top-line growth at Hugo Boss and limited room to maneuver on pricing, we would anticipate it to be another challenging year,” said Felix Dennl, an analyst at Bankhaus Metzler.