Adolfo Domínguez swings to loss despite revenue growth
2019 was a year of mixed results for Adolfo Domínguez as the Spanish designer company reported a loss despite revenues growing 2.6% year-on-year to €115 million ($127m).
The Ourense-based group blamed a change in its accounting method for the €8.3 million ($9.1m) annual loss. The figure for the year to February 2020 is a dramatic shift from last year’s €500,000 loss.
In a trading report, Adolfo Domínguez explained that “the company has decided, out of caution and transparency, to withdraw any assets for tax credits from its balance sheet in line with guidelines published by the European Securities Market Authority (ESMA).” Without applying the new accounting regulations, annual profit was €700,000.
But there was a bright spot: full-year revenues increased by 2.6%, helped by a healthy 5.9% increase in like-for-like sales. In fact, like-for-like sales have grown by 30% since 2015, despite the firm trimming its store portfolio by 154 outlets over the past four years. Adolfo Domínguez, which currently has 390 stores, said online sales also surged, up by 25.5% on the previous year. Between 10% and 15% of total revenues are now generated online.
Sales grew across all 22 geographies. In Spain, like-for-like sales were up 3%, outperforming the wider Spanish retail market, which saw a 1% increase according to local trade association Acotex. Mexico was the fastest-growing international market, up 9.5%, followed by Japan, up 9%, and Europe, up 4.9%.
On an Ebitda basis, profit rose for the second consecutive year to €11.3 million. Pre IFRS16 Ebitda profit was €2.2 million, which is a twofold increase from the same period in 2018.
The company declined to provide information about the impact of the coronavirus pandemic, with CEO Antonio Puente telling shareholders that forecasts will be provided later this year. “It is still too early to know,” he said, adding that the retailer has just started reopening some stores.
Innovation projects and strategic appointments
“We want to innovate our way out of the crisis,” said Adriana Domínguez on Friday as the company released its latest results. The newly appointed president of Adolfo Domínguez, who took over from the brand’s founder last month, used the opportunity to introduce ‘ADN’, a new artificial intelligence project. The initiative combines technology and personal styling to offer customers a personalised shopping experience. At a time when visiting physical stores remains a concern for cautious shoppers, ‘ADN’ will allow people to get a curated selection of items to try on at home.
It comes on the back of a strengthened management team, with the business hiring and promoting four new executives over the course of 2019. Former Amazon manager José Carlos Lorenzo García has become director of global retail, and Manuel Garrido Haz has been named as finance director. Carlos Arjiz García was promoted to oversee the brand’s communication and visual merchandising, while Miguel Vázquez Caride is the new IT director.
The company, which placed more than 80% of its 1,000-strong workforce on furlough during the Covid 19 crisis, said it will bring employees back to work as stores begin to reopen. The reopening phase is expected to run until June 2021.
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