Under severe pressure on the global supply chain, German fashion company Hugo Boss is expanding its production capacity near its European base to reduce its dependence on Southeast Asia.

CEO Daniel Grieder’s goal is to double sales to 4 billion euros per year by 2025. He told the Financial Times that the supply chain disruption is causing Hugo Boss and its competitors Bringing “incredible challenges”, supply shortages, delays and rising transportation costs.

In response, the company is expanding its factory in Izmir, Turkey, Grieder said, adding that it hopes to hire another 1,000 workers there, increasing the number of employees by a third. It also plans to make more investments in machinery and tools on site.

Grieder also promised to end the company’s many years of “dormancy”, which was previously owned by British private equity firm Permira, but failed to successfully transform itself from a high-end brand to a luxury brand.

Grieder told the Financial Times that he will expand the brand’s product portfolio to provide more casual and casual clothing in addition to the flagship business clothing line. He has allocated 500 million euros for store investment in the next five years, and plans to increase his marketing budget by 100 million euros annually until 2025.

The Izmir factory was built in 1999 and is already Hugo Boss’ largest single production base, traditionally mainly used for the production of formal wear. The company also has production bases in Germany, Poland and Italy, with Turkey accounting for about 20% of its apparel production. Another 30% of clothing comes from suppliers in or near Europe. Hugo Boss said that this share will increase further in the next few years.

A large part of the industry relies heavily on production in Southeast Asia, where labor costs are much lower.

Grieder is a 60-year-old industry veteran, he dug from rival fashion brand Tommy Hilfiger, he said this change will be permanent. “Our future strategy is to produce more garments closer to the sales market.”

He said that products in the Americas, Europe and Asia will be produced there, adding that this will be a “tremendous change” for the company.

In the past year, the company has rescheduled production in Izmir and now also produces sweatshirts, women’s clothing and other apparel there. Grieder said that in recent months, a proprietary factory close to Europe has become a “huge competitive advantage.”

The company is also considering transferring part of its production to “urban factories” in Western countries, and will begin trial production of jeans and denim in a small factory in Los Angeles in the first quarter of 2022.

In the third quarter of 2021, Hugo Boss sales increased by 40% year-on-year, while revenue increased by 7% from the third quarter of 2019 before the pandemic. Last year, sales fell 31% to 1.95 billion euros, and the company had a net loss of 219 million euros.

Grieder said that as demand related to postponed events such as weddings has been suppressed, and hit by lockdowns and the sharp increase in work from home, demand for formal wear has rebounded more than expected.

Grieder said the company was worried that sales of formal suits and other traditional suits would drop by 50%. “This did not happen, and we are very happy about it,” he said.