Exclusivy: Ex-Hugo Boss CEO becomes Bottega Veneta head

September 29, 2016 11:18 AM EDT

The logo of Kering is seen during the company's 2015 annual results presentation in Paris, France, February 19, 2016. REUTERS/Charles Platiau

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By Astrid Wendlandt

PARIS (Reuters) - French luxury and sports group Kering has appointed former Hugo Boss Chief Executive Claus-Dietrich Lahrs as the new head of its Italian leather goods maker Bottega Veneta, it said on Thursday, confirming an earlier Reuters report.

Lahrs, who left Hugo Boss in February after eight years at the German fashion brand, joins Bottega Veneta after a year when the Italian brand's sales have dropped continuously, partly due to markdowns and weaker demand from Chinese buyers, its biggest customer base.

Lahrs is one of the luxury goods industry's best-known veterans.

Bottega Veneta is now Kering's top problem after the group succeeded in turning around Gucci much faster than many expected under the leadership of Marco Bizzarri, who was Bottega Veneta's boss for five years until 2014.

In the quarter to June, Bottega Veneta's sales in its own shops were down 11 percent. The brand is Kering's second biggest in terms of revenue behind Gucci. In 2015, it generated nearly 1.3 billion euros ($1.5 billion) in sales.

"Now that Gucci is doing better, pressure in the group has come down but Bottega Veneta remains a problem," the source said.

Lahrs, 53, earned a strong reputation for developing Hugo Boss's digital drive and retail network and spearheaded its global expansion in countries such as China.

He also drafted in designer Jason Wu to develop Hugo Boss's womenswear.

The German executive brought Hugo Boss more upmarket but in recent years, the brand was hit hard by the luxury goods downturn and Lahrs left on the back of a profit warning due to weak sales in the United States and China.

He worked for several years at Richemont's (NYSE: CFR) Cartier and for fashion brands at LVMH including Louis Vuitton and at Dior where he was in charge of haute couture.

He faces a difficult task. Bottega Veneta has been a one product brand for too many years, analysts say, having relied excessively on its weaved leather technique called intrecciato, a story which now appears to have run its course.

Several industry observers also say the brand may need a creative reboot because competition from more smaller, more innovative and exclusive leather brands is fierce and demand for luxury goods generally more subdued.

"There was an urgent need to do something at Bottega Veneta, as the brand sales are falling fast. The issue is down to a lack of product innovation: Intrecciato is still most of what you see, however it has now become boring... you need powerful new product ideas at Bottega Veneta," said Luca Solca, luxury goods analyst at Exane BNP Paribas.

"Maybe the new CEO will be able to bring execution and operations discipline to Bottega Veneta. He is certainly in for a challenge," he added.

"The big question right now is the future of Tomas Maier," the source said of the German designer who has been working for Bottega Veneta for more than 15 years.

Bottega Veneta will also have to clarify its market positioning: most of its handbags cost at least 1,500 euros at its shops but buyers can find them with major discounts at outlets in Italy and elsewhere.

($1 = 0.8909 euros)

(Editing by Alexandra Hudson and Ruth Pitchford)

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