Activist investor Bluebell Partners is seeking to change the management of German luxury fashion house Hugo Boss, arguing the CEO has failed to properly execute the strategy, Marco Taricco, the fund’s partner told Activist Insight Online. Taricco said Bluebell likes the brands and the firm’s large distribution network but believes a different management team could make a better job of capitalizing on these assets. Bluebell’s stake is below the disclosure threshold.

Mark Langer was appointed CEO of Hugo Boss in May 2016 after previously serving as chief financial officer. After taking the helm, Langer launched a strategy revolving around revamping the company’s retail stores to improve foot traffic.

However, the company’s sales growth between 2016 and 2019 has largely disappointed, while the operating margins have declined, although the fourth quarter growth was stronger than expected. Shares have dropped more than 20% during Langer’s tenure.

“The problem with Hugo Boss is that they have lost the momentum mainly because of the poor execution by the management team,” Taricco said in an interview with Activist Insight Online. “[Langer] might be a good CFO, but we don’t think he has the profile and credibility to lead a company like this one.”

Taricco has argued that Hugo Boss should rely less on its wholesale business and improve its retail footprint, while considering expanding its accessories line.

Bluebell, an activism advisory that has worked with high-profile activists such as Jana Partners and Elliott Management, launched an activist fund a few months ago with 50 million euros in startup capital. In addition to Taricco, the fund counts former Bulgari CEO Francesco Trapani and former Goldman Sachs managing director Giuseppe Bivona as partners. Trapani had been appointed to the board of Tiffany’s following a campaign by Jana Partners in 2017. He resigned in November 2019 as the company was sold to LVMH.

Taricco said none of the partners are interested in a board seat at Hugo Boss but Bluebell might have people to suggest for the supervisory board. Hugo Boss should appoint new board members at the next annual meeting in May and “most importantly” identify a new CEO, Taricco said.

Bluebell has already contacted the company but the conversations are just at the beginning, according to Taricco.

Hugo Boss did not immediately reply to a request for comment.

The high fashion industry has been undergoing a period of consolidation. Following Michael Kors’ acquisition of Versace in 2018, LVMH acquired Tiffany’s last year. Kering, LVMH’s smaller rival, was rumored to be interested in Italian brand Moncler. Taricco said Hugo Boss investment is not an M&A play.

Shares in Hugo Boss were up 2.6% near market close Continental European Time in Germany.