Desigual sees 10% drop in sales but net profits more than double
Mar 13, 2020
“We are satisfied with the achievements of the year, they are in line with our targets. We are exactly where we need to be,” Thomas Meyer, founder of Desigual, had said when he forecast a drop in sales of up to 10% for the 2019 financial year. And his prediction came true, with the Spanish clothing business revealing on Friday that revenues for the year to 13 March fell by 10% to €589 million from €654.6 million a year earlier.
During the period, the brand’s online channel was a star performer. Online sales jumped 7% and accounted for 14.2% of total revenues. The numbers showed that Desigual’s investment in the area is bearing fruit, particularly efforts to establish collaborative partnerships with top digital partners and strengthen its own website with the launch of a new version in 2019. Mobile sales are particularly important for the business, given that 71% of website traffic comes from mobile devices. According to the company, a key part of its transformation plan is the digital channel, while sales outside western Europe are top priority. Currently, they account for 36% of total revenues and the share is expected to surge to 60% by 2023.
Profitability improved dramatically, with net profit for the year climbing 121.3% to €7.5 million from €3.4 million a year earlier. This was driven by improvements in the distribution network and increased investment in fast-growth areas, such as digital channels and sales outside western Europe. Additionally, the company reviewed its presence in the European retail market. EBITDA reached €55.9 million, down from €63.5 million in 2018. Meanwhile, net cash flow remained positive, standing at €160.5 million after Desigual invested €22.8 million to support the brand’s relaunch and strengthen its logistics infrastructure with new omnichannel technology. Between 2016 and 2018, Desigual invested a total of €62 million.
Looking beyond Europe
“During 2019 we accelerated the reorganisation of the business, while laying the foundations for the repositioning of Desigual with a new brand image and a more innovative and creative design approach aimed at targeting a younger audience,” said Alberto Ojinaga, managing director. Going forward, the executive said the company will continue to reorganise the business to focus on driving growth online and in geographies outside of western Europe, as well as further establishing the new brand identity on a global scale. New stores are set to open in Singapore, Japan, New York and Las Vegas, while India and South Africa could be added to the list of markets.
In 2019, Desigual undertook a significant expansion in Japan, which is its fifth largest market in terms of sales. Recent openings in Tokyo and Nagoya were joined by the implementation of a growth plan in Latin America, especially in Peru, Mexico and Guatemala. Desigual currently operates 47 stores in 14 countries in the region, and more than 500 stores globally. Founded in 1984, the Barcelona-based company has over 3,700 employees to help it deliver six product categories.
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