2020 was Desigual’s worst year ever
The pandemic has not spared Desigual. The health crisis has hit the Catalan fashion label just when it was beginning to get back on its feet and reap the initial benefits of the internal restructuring that followed Eurazeo’s exit as shareholder and the overhaul of Desigual’s brand identity. The label’s sales first began to contract in 2015, the same year the restructuring process began. Desigual was founded in 1984, and had never before experienced a year as dark as 2020.
Founder and CEO Thomas Meyer decided to talk to the media for the first time in 2020. At the time, Covid-19 still seemed a distant threat, its impact limited to Asia, with consequences for regional sales, the supply chain and logistics.
Meyer was prudent about the virus’ possible spread, and said he was “satisfied” with the results of the 2019 financial year, despite the latter being the fourth consecutive year in which Desigual’s sales slumped. “We are where we are meant to be,” he quipped serenely, proud of having streamlined his company and looking at the “tough years” Desigual had experienced as an opportunity for renewal. He added: “Desigual is a brand born from the need to adapt to circumstances.”
To overcame the crisis sparked by the pandemic, Desigual surely needs to draw on its reserves of serenity. The crisis struck the label hard, its revenue plunging by 38.8% to €360 million in 2020, a huge shortfall from the revenue of €589 million recorded the previous year, when sales had fallen by only 10%.
Positive e-tail results not sufficient
As for many other fashion labels, online sales provided much-needed oxygen for Desigual in the midst of the catastrophic crisis triggered by the pandemic. The label’s e-sales rose by 48.6% in 2020, generating a revenue of €100 million.
However, despite accounting for 28% of Desigual’s total revenue, this was not sufficient for e-tail to “compensate for the impact of the Covid-19 crisis.” In 2020, the company invested €18 million to develop its online business and deploy IT and logistics capabilities designed to “support [Desigual’s] digital transformation.”
In 2019, the company was in the black again, posting a €7.5 million profit. In 2020, the trend was reversed, and Desigual’s net income plunged into the red, with losses for €83 million. Luckily, the company recorded a positive cash-flow for €108 million, thanks to “swift, agile decision-making during the pandemic’s first phase,” and to the adoption of measures aimed at “managing inventory and reducing costs.” This will enable Desigual to “face future challenges with a healthier, debt-free financial position.”
Desigual published its annual financial results on Wednesday March 10, providing at the same time detailed information on its sales breakdown by market. Spain, France, Italy and Germany altogether accounted for 65% of Desigual’s business.
Unfortunately, these four European markets were affected by prolonged store closures in the course of 2020: stores were shut for 33% of total working days in France, for 28% of them in Spain, for 26% in Italy and 22% in Germany. Desigual was also negatively affected by “lower footfall in the intervals between the [pandemic’s] various waves, and by the drastic decrease in tourist visits” notably in Spain, its main market. In the last financial year, sales in Desigual’s physical stores dropped by 45%.
Goals is return to normality in 2022
“2020 has been an extremely complex year, and the pandemic has had a huge impact on our main markets. We took advantage of this transition year to accelerate the progress of some projects we had earmarked for the future, while strengthening the company’s financial position,” said Alberto Ojinaga, general manager of Desigual. He added that “policies aimed at cutting costs and managing inventory have enabled us to maintain a healthy cash flow.”
For 2020, Desigual is forecasting a “complicated” year. “Currently, 50% of our stores are still affected by total or partial closures on week-ends,” said Ojinaga. However, he added that “the acceleration in our plans for restructuring the product range, repositioning our brand and expanding our online business, which are all beginning to bear fruit, allow us to look forward to the future with optimism.” Thus, if “vaccination measures will make it possible to stabilise the situation to a degree by the summer, benefits will already be felt in the current year, and we expect to return to normality in 2022,” said Ojinaga.
According to him, Desigual’s future success rests on the adoption of an omni-channel model, notably through an expansion of the e-shop, enabling the label to enter some one hundred new markets. “In 2023, our goal is to generate 60% of our total revenue through the sum of our e-tail sales and those coming from non-European countries,” Ojinaga said. The corresponding share is currently about 45%. By the end of 2021, Desigual expects to make its e-shop operational in 150 countries. “Our priority is to draw closer to our consumers and to accelerate the company’s digitalisation,” concluded Ojinaga.
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