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Hugo Boss says it suits David Jones

German fashion label Hugo Boss has dumped Myer Holdings (ASX: MYR) in favour of its more up-market rival David Jones (ASX: DJS).

“Based on our trading performance to date we believe that our product and target demographic are best aligned to the David Jones brand portfolio and customer base,” Hugo Boss Australia and New Zealand managing director Matthew Keighran said in a statement.

The move is expected to cost Myer around $7 million in sales annually. Myer boss Bernie Brookes says Hugo Boss represented less than 0.01% of total sales, so was only a small brand, but he was disappointed to be losing it.

David Jones boss Paul Zahra said, “We see great opportunity in the corporate suiting market and securing a brand like Hugo Boss secures DJs as an authority in men’s corporate wear.” David Jones has a strategy to become known as the ‘House of Brands’, and Hugo Boss will add to the current stable of men’s upmarket suit brands including Zegna, Canali, Armani and Paul Smith.

David Jones is aggressively targeting the corporate menswear market, which is estimated to be worth around $400 million in Australia. David Jones recently announced that it will open six Brooks Brothers in-store boutiques – famous for clothing 39 US presidents and providing the male clothing for the movie Great Gatsby. Mr Zahra says menswear is a growth area for the company, and expects the Hugo Boss brand to be amongst its top 15 suppliers.

Department store retailers have been under extreme pressure to lift their game in recent years to compete with online-only competitors, as well as an influx of overseas fashion houses including Spanish-based Zara, TopShop, Swedish giant H&M, Japanese fashion powerhouse Uniqlo and US retailers American Apparel and Hollister. Local fashion retailers Country Road (ASX: CTY) and Premier Investments (ASX: PMV), which owns brands such as Portmans, Jay Jays and Just Jeans will also be feeling the heat.

Foolish takeaway

In the battle of the brands, we could see either David Jones or Myer gain some momentum and thereby pick up most of the fashion sales. But over the long term, both retailers cater to different markets and the battle of the brands is likely to continue as long as both are around. Losing Hugo Boss is not the end of the world for Myer, but it won’t want it to make it a habit.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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