Desigual starts profound restructuring after stagnating sales in 2015

The fashion label created by Thomas Meyer has started its restructuring plan after selling 3 percent less in 2015 than in 2014 and see reduced its gross operating profit by 24 percent over the previous year.

These data have not gone unnoticed by the French investment fund Eurazeo, which last year took 10 percent of the capital of the company. As highlights 'El Confidencial', the French group has reviewed downwards its participation in the company according to its calculations, Desigual is worth half than two years ago.

This is reflected in the depreciation of assets contained in the results of fiscal 2015: Eurazeo bought a tenth of Desigual in 2014 for which he paid 285 million euros - valuing therefore the whole fashion group in 2,850 million euro-. Now, Eurazeo valued the same shareholding in half, barely up to 134 million euro.

Yet Desigual has decided to stand up to adversity with a restructuring plan that begins with closing its less profitable stores and not to renew part of its staff (temporary employees).

Desigual sold 3 percent less than in 2014, seeing its EBITDA by 24 percent

Annual sales have fallen by 60 million euros from 2014 to 2015, but EBITDA (earnings before interest, taxes, depreciation and amortisation) has suffered the most pronounced dip (-24 percent).

Spain and France were the markets most affected by the decline in sales, while the business outside Europe, mainly in Latin America, has remained stable, reaching 10 percent of the group’s total turnover.

In an interview with ‘El Economista’, the director of marketing and communication of the fashion company founded by Thomas Meyer, Borja Castresana, said that this decline is linked to the strong "investment effort" made in 2014 (steady pipeline of store openings and Viladecans logistics center).

Reorganisation in two phases: site closure and review of the business structure

The transformation plan that has launched the fashion group will be executed in two phases: the most immediate means reducing its sales network in order to make it more profitable.

In the medium to long term, Desigual seeks to reorganise its business model, focusing on key product categories - men, women, accessories and children - and relegating to the background product lines such as perfumes, shoes, sportswear and house clothing.

From a geographical point of view, Desigual will focus all efforts to revitalise its sales in Spain, Italy, France and Germany, markets which make 70 percent of the group’s total turnover.

Finally, Desigual has launched a new board structure: Thomas Meyer as product manager and CEO; Pierre Cuilleret responsible for client and channels, and Alberto Ojinaga as corporate director.