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Desigual improves profitability and slows down sales in the first half of the year

Light at the end of the tunnel for Desigual. The Catalan company founded by Thomas Meyer ended the first half of 2019 with improved figures reflecting the results of the 2015 restructuring plan. From January to June, the company’s EBITDA reached € 27.2 million, an increase of 22.1% compared to the same period in 2018.

The company presented its new image and logo in June

Increasing profitability, however, with a 10% decline in sales to EUR 290.7 million, compared to EUR 323 million in the first half of 2018. At that time, sales in the first half of the year contracted by 14.5% compared to a decline of 9% , 6% in the same period 2017 with a turnover of 378 million euros. Despite generally lower sales, the Group managed to limit the decline and is aiming to stop the double-digit decline.

“The first half of 2019 is more encouraging than expected,” “In the first half of the year, we made significant progress as part of our transformation plan.”

This improvement was partly due to the good performance of the spring / summer 2019 collection, which led to better results “for most channels and markets”. By contrast, the year 2018 had been a very difficult year for the company. It had decided to postpone publication of its financial results to avoid coincidence with the presentation of the new brand image and to present the first figures for 2019 at the same time.

“2018 was a very difficult year, marked by many developments for Desigual, with Thomas Meyer repurchasing Eurazeo ‘s 10% stake last August, reorganizing the board and renewing the board and the committee,”

View inside the Desigual inBeta Pop-UPS in Ibiza

he said Executive Director. Desigual has also opted for a new and younger management team, which has been staffed several times in recent months. In this context of change, sales fell for the fourth consecutive quarter since the first half of 2015.

Desigual closed the last financial year with sales of EUR 654.6 million, 14.3% less than in the previous year, reflecting the decline of 14.5% in the first half of the year. EBITDA amounted to 63.5 million euros and corresponded to 10% of sales. These figures are far from the strong results of 2014, the year in which Eurazeo participated in the company.

At that time, the Catalan brand achieved a turnover of 962.5 million euros and aimed for one billion euros for the following year. Today, Ojinaga does not exclude this goal, but stresses that it takes time for the company’s transformation plan to take effect. A potential IPO that was part of Eurazeo’s ambitions when it participated in the brand was no longer relevant.

One of the company’s core axes is online sales. It already stood at 12.7% last year and increased by 7.3% in the first half of 2019 to 14.1% of total sales. “Today, 25% of revenue comes from the digital channel or from distribution outside Europe, and our goal is to reach 60% within five years,” says the manager. To this end, Desigual has already started to rebuild its logistics infrastructure with four centers: two in Spain, Gava and Viladecans, one in the US and one in Hong Kong.

This transformation of the logistics processes, the information systems and the sales network required investments of 62 million euros between 2016 and 2018. The goal is to promote an integrated sales model.

The RFID system is currently being used in 30 branches, but the entire network is expected to benefit already next year. For 2019, the company plans investments of up to 30 million euros – 10 million euros more than in previous years. This amount will be used for the renovation of outlets, the improvement of the structure and the search for agreements with digital partners. “We want to strengthen strategic alliances with major e-retailers like Zalando or El Corte Inglés,” explains Alberto Ojinaga.

One of Desigual’s new strategies is working with artists like Miranda Makaroff

“We are strengthening our distribution network by using the online channel and franchising to expand into markets such as South America and Asia,” says Alberto Ojinaga. Desigual has developed a five-year plan to conquer the Japanese market. It is expected that a store in Ginza (Tokyo) will be opened and several franchises in secondary cities.

Japan is in fifth place behind Spain, Italy, France and Germany in terms of market share. Contrary to the general trend, sales in the Asian market increased by 4.7% in the first six months of 2019.

The restructuring plan launched in 2015 aims to strengthen the corporate structure by focusing on more agile methods and more sustainable growth. For this purpose Desigual concentrated on a comprehensive reorganization of the distribution network.

With 31 closures last year, the brand ended the year with a total of 510 stores (386 owned and 124 franchises), which represents a dozen more outlets than last year, but far from the 552 it closed in 2015. Desigual also redesigned its brand image and product with “more innovative designs, better quality without price increases and the development of accessories” in order to make the targeted recovery visible to the outside world.

The company’s transformation project is expected to be completed by the end of 2020. With some patience Desigual should soon be able to reap the benefits of his work …

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