Mango’s Toni Ruiz on the brand’s ambitious growth strategy
“With only five weeks to go until the end of the year, I can reveal that sales have performed very well in the year to date. We hope to achieve positive results this year,” said Toni Ruiz, CEO of Mango at the unveiling of the brand’s new distribution centre in Liçà d'Amunt, Barcelona, on 27 November. Spanning 190,000 square metres, the €230-million massive logistics centre marks a milestone within Mango’s expansion strategy, as envisioned by the CEO.
The past few years have been rather difficult for Mango. An aggressive restructuring plan sent the business into the red in 2016. And while losses have improved, the brand is struggling to make profits. “We have had several difficult years,” said the chief executive, who took over at the helm of Mango in 2018 after leading the finance department. “We have undergone a massive transformation. Sales have performed very well this year, and we hope to confirm an increase and positive results in a few weeks,” he added ahead of Black Friday. The shopping event kicks off Mango’s most lucrative trading period, fuelled by Cyber Monday and the Christmas campaign. “It has always been crucial for us,” Ruiz continued.
High expectations for 2019
Mango is expecting to end the year with positive results across all key performance indicators. “In 2016 we had a net debt of €617 million. In 2018, we reduced it to €315 million. It was a significant improvement,” the CEO said. “We finished last year with a better debt ratio and this year we’ll post a better performance across net debt and sales.”
Financing the company’s operations has become a crucial part of Ruiz’s tenure. Last year, Mango signed an agreement with its lenders to refinance €500 million of debt through a syndicated facility with a five-year maturity. “This allows us to restructure our debt ahead of the next few years. And we will be able to pay off our debt commitments in the short term,” he added. “We understand there may be projects that are much more profitable than quickly paying back debt. [But] in a few years, Mango will be debt-free.”
What kind of high ROI projects is the company working on? “We are in an ever changing sector. Key priorities are reshaping our store portfolio and investing in technology,” Ruiz explained. But rather than pushing full steam ahead, the retail transformation will take place as the company improves its omnichannel capabilities. A crucial part of this will be the opening of regional depots to support deliveries. “We are also investing in technology and big data. Being a fashion company, leveraging data is increasingly important to improve our product, operations and marketing… We have enough projects and plenty of ideas to continue Mango’s transformation as a large company,” he added.
Among other developments, in November, the company announced it was issuing debt for the first time in its history on the alternative fixed-income securities market (MARF). “It wasn’t about additional funding. We wanted to use alternative funding sources to bank loans and enter a new market. It was a small sum to bring down our working capital costs. We have no further plans as we have no need for them,” the CEO reassured investors.
A logistics upgrade and future plans
Looking to the future, the new distribution centre in Lliçà d'Amunt, Barcelona, is a key part of the company’s growth strategy. “This is a key asset,” said Ruiz. Antonio Pascual, supply chain director, added: “The logistics centre allows us to provide the premium service our customers have come to expect. We are among the best in terms of delivery capabilities and personalisation.”
The facilities will be further expanded with an additional 90,000 sq mt of space by 2023. “The expansion will help us achieve three objectives. First, we want to ensure we can continue to provide the same level of customer service, without constraints, for a very long time. Secondly, we want to have a more agile system to allow us to us to dispatch products to our stores together with customer orders. And thirdly, we want to fulfil customer orders,” Antonio Pascual said. Currently, the logistics hub only serves stores and depots. “We don’t have an estimate yet, but the number of jobs at the facility will definitely increase, given that we are expanding its size by 50%,” he continued.
Mango has still a long way to go in terms of RFID (Radio-frequency identification), especially if it wants to compete with its largest rival, Inditex. The owner of Zara wants to deploy the inventory control technology across all brands by 2020, while Mango has currently only 20 stores powered by RFID. “We are running a pilot. Our intention is to extend it to all stores,” Antonio Pascual said regarding the company’s three-year plan. “We don’t know how much we’ll invest in it at this stage, but we do know that we want to continue with this project and that we’ll give it a boost next year," he added.
“We have greatly improved our assortment, our product is now much more attractive. We are working very hard on it. Market position and DNA is very important for Mango,” said the CEO, adding that the store estate will be reviewed to “move from smaller spaces to larger ones” to ensure the company continues to deliver a strong shopping experience, offering and in-store services. Currently, Mango has a presence in 110 countries through a combined 800,000 sq mts of selling space. “Over the past six years, we continued to grow our store estate and increased the average size of our stores by 50%,” said Ruiz.
After opening a digital innovation centre in Barcelona in April, Mango's business and online positioning are a priority. “We are making progress on our digital transformation. Last year we became a leading company, with 20% of revenues coming from e-commerce,” Ruiz continued. That share is expected to reach 30% in 2020. “In the future, we want to be a data-driven fashion company. We must use all the insights at our disposal to make a qualitative leap,” the chief executive added. Can he realise his ambitions? The soon to be released annual report might give some answers.
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