After five consecutive years of losses, fashion retailer Adolfo Domínguez may be turning the corner. In the first quarter of this year, the company managed to reduce its losses by 21.6 percent on the previous year, and has significantly improved its operating costs. This summer has also seen it launch a major advertising campaign, while at the same time strengthening its online presence with a new collection.
The appointment late last year of Estanislao Carpio - responsible for tripling Camper's sales and making it a global brand - as director general has energized a company that was caught napping by the current crisis and severely punished. Carpio's approach seems to be a return to the original values of the company, famous for the linen and cotton collections that earned it the sobriquet "wrinkles are beautiful." But any impact on profits will take longer. In a statement to the CNMV stock exchange commission last year, Adolfo Domínguez said that it doesn't expect to return to profitability until 2014.
The improved first-quarter results will need to be built upon over the course of the year before the company can start opening the champagne. That said, it should be borne in mind that only six months ago, on February 28, the retailer announced losses for the 2012-2013 financial year of 24 million euros.
Carpio has also decided to rescind the company's decision to impose salary cuts of up to 15 percent, saying that this encouraged talent to move away to its rivals. The company's results have also been affected by the VAT hike in Spain.
Carlos's approach seems to be a return to the original values of the company
Adolfo Domínguez says that its first quarter results reflect the impact of what it called a "very cold and rainy spring" throughout Europe, along with the costs of closing several stores in Spain and an overall 14.2-percent drop in sales compared to 2012 (sales in Spain fell by 22.6 percent).
The basis for future growth will be international expansion, the company says, with half of turnover coming from overseas. New stores will operate on a franchise basis, which it says will significantly reduce its operating costs. Last year, 38 percent of sales came from outside Spain and Portugal, but its franchise model meant that this translated into just 28 percent of profits originating abroad. Carpio has also said that the company will press ahead with closing more unprofitable stores in Spain and Portugal.
The company has closed five directly managed stores, along with seven franchises. It will also study opening more outlets within the El Corte Inglés chain. Over the last year, it has closed 10 percent of its outlets in Spain and Portugal, leaving it with 435 outlets.
Carpio also intends to strengthen the company's online sales. Adolfo Domínguez was a relative latecomer to e-trading, but in the first quarter of this year internet sales increased by 108 percent, to around one million euros.