Mango CEO Toni Ruiz: Brand has weathered the storm
Only a year ago, FashionNetwork.com discussed with Toni Ruiz the record annual results posted by the group of which he had just been appointed CEO. An interview that took place physically in Madrid, unmediated by masks or computer screens, with a casual ease that nowadays is both a distant memory and feels, inevitably, strange.
Only 48 hours after that meeting, the Spanish government decreed that all retail activity in the country had to stop, and Mango closed its 400 Spanish stores. In the following days, most of the group’s other European stores were forced to follow suit.
Twelve months and a pandemic later, FashionNetwork.com has had another conversation with Ruiz, this time of course on Zoom. Like many, we didn't see this coming.
“The pandemic hit us in a major way,” said Ruiz with total honesty. “After a couple
of rather troubled years, in 2015-16, we have gradually steered the group back on its original course. Thanks to our product positioning and commercial efforts, a gradual reduction in the retail and logistics investment we had been undertaking, and the impulse provided by e-tail, we reached 2019 in buoyant mood and with positive results,” added Ruiz, recalling the group’s performance improvements and the financial year in which Mango turned profitable again, generating a record revenue of €2.374 billion. “Our satisfaction was extremely short lived,” he lamented. Just a couple of days, between the publication of Mango’s annual results and the first store closures in Europe.
Initially, the prospects for 2020 seemed favourable. “The first two months of the year were very positive, we were growing by almost 10%. However, in March and virtually overnight, most of our stores were forced to close down. In the second half of the month, online sales too were severely affected,” said Ruiz. Between March and June, e-tail accounted for up to 93% of Mango’s total sales, limiting the slump in revenue to a 70% shortfall.
“From July, we experienced something of a recovery, fuelled by discounts, in a different commercial period than in the previous year. Until October, things kept improving and our sales trend was on the up. Eventually, we were only 6% below the previous year. Today we are almost on par with the results of 12 months ago,” he added.
Mango stores “hit extremely hard”
“We were hit extremely hard,” said Ruiz, recognising the bolster provided by Mango’s e-shop, available in 85 countries, whose sales jumped by 36% in 2020 and generated a revenue of €766 million, equivalent to 42% of the group’s total annual revenue.
“A big result, that helped us end the year with those numbers,” he said. Ruiz added that: “We are happy because, despite the difficulties, we have not only been able to weather the storm and drive revenue at levels similar to those of the main industry leaders, but also because, in parallel, we have pushed ahead with transforming the company.”
“I was appointed [Mango’s] general manager in October 2018, and CEO the week before the pandemic’s outbreak. It was a brutal shock. The first document I had to sign as CEO related to the company’s ERTE (Expediente de Regulación Temporal de Empleo, the staff furlough provisions),” he said. Faced with the unexpected, the management team focused on “safeguarding the company’s financial solidity and liquidity,” activating measures to reduce operating expenses by €230 million, and boosting liquidity through a €240 million loan from ICO (Instituto de Crédito Oficial, a Spanish state lender).
Reducing bank debt in “worst year”
Ruiz believes that Mango has “achieved substantial cost savings, thanks to the solutions afforded to us by the various states [where we operate], to the non-renewal of temporary employment contracts that were expiring, and to rent renegotiation.” “I am very proud that our net bank debt has not increased, in fact we reduced it for the fifth consecutive year by about 20%, from €194 million to €156 million,” added Ruiz. He explained that Mango has mitigated the pandemic’s impact thanks to “the purchasing department’s rapid reaction” and to efficient inventory management, with stocks down 10%.
“We are proud, happy and satisfied. It’s hard to say this when you still have people on furlough and some 500 stores are closed, but we’ve worked hard to cope with this situation,” said Ruiz in a quietly positive tone. “The news might be that Mango is losing money, but I think the important element is the transformation we are carrying out,” he added. In the 2020 financial year, Mango recorded a 22.4% sales shortfall, down to €1.842 billion.
Future projects: ending Violeta, launching home line, marketplace
“Discontinuing the Violeta [plus-size] line means integrating all its products [in Mango]. Having a different brand for women with curvy figures seemed outdated to us,” said Ruiz. He added that “we understood customers were asking for certain products and it seemed to us an interesting opportunity, developing a line consistent with our style,” referring to the launch of a separate collection of home decoration products. “For us, the home decoration category is part of the Mango universe. We are beginning with an online launch, to gain an understanding of which products work best, and we will later deploy the line in our physical stores,” said Ruiz.
Mango’s searching for new horizons has also meant opening up its e-shop to other brands, through a first agreement with Italian lingerie label Intimissimi. “We find this partnership very interesting,” said Ruiz. “For a long time, we have had data on our customers buying items from other brands in product categories we do not stock. Unlike some retailers, who buy other labels and then distribute them on their websites, we carried out a technological integration process, in order to be able to feature all sorts of catalogues on our site, from products to services and data. Rather than simply sell more, this enables us to quickly understand customer data and behaviour in categories we do not cover, and analyse for example whether we can include these customers in our loyalty programme.”
“We don’t want to trivialise our e-shop. We have a clearly identified clientèle and market positioning, so we focus on analysing what our customers would appreciate,” said Ruiz, explaining that “Mango has more than 700 million annual website visits, so we could tap these to sell many things. But we have no interest in this approach, our aim is to inspire our customers and curate our product range. We will introduce new product categories that are relevant for us, featuring well-known brands from complementary sectors.”
No job cuts at Mango
“Despite our negative results, we have not stopped,” said Ruiz, referring to the plan to build a Mango Campus. “We are rethinking the way we work. We need to be much more agile and transversal,” he added. “We want our offices to be places people are keen to come to work to, places that attract talent and encourage creativity and innovation. It is one of our great challenges.”
Above all, Mango wants to safeguard jobs. “Mango is not planning on making job cuts. In some countries, we are finding it difficult to hire retail staff, for example in France and Germany” he said, underlining it is hard to recruit talented personnel, especially in IT. “We are having trouble finding the right candidates to enable Mango develop these capabilities. We are all competing for the same kind of profiles,” said Ruiz.
Regarding the industry’s evolution, Ruiz noted that “like many companies during the pandemic, we have realised the way out of this situation is through our ecosystem; it is not about one player winning and the rest losing, but about all of us getting through this by means of collaborations and alliances.” One of the areas in which synergies are needed is sustainability. “In terms of sustainable fabrics and raw materials, we are experiencing brutal inflation levels because demand is much higher than supply. This is something we have to work on industry-wide, in order to make progress faster,” he said.
For 2021, Ruiz is relying “chiefly on e-tail and on the changing preferences of consumers. Mango has taken on the challenge of generating €1 billion worth of online sales.” Sales forecasts will of course depend on the length of time stores will remain closed. “The worst-case scenario would be generating the same revenue as last year, but I think we will do better,” he said
Stores will evolve
In terms of e-tail, “the goal is primarily to develop Mango.com, not simply by selling third-party products but also by maintaining our commitments to our customers. We want to make money to foster sustainable, profitable growth,” said Ruiz, indicating that, in his preferred scenario, online sales would account for between 42% and 45% of total revenue.
When considering the uncertain future of Mango’s stores, Ruiz is clear that “they will continue to be an important asset for the group, as a key hub to cater for and provide services to customers.” He also underlined that: “Their role will surely change, and will not be the same for all [our stores]. Mango shops will become experiential venues, providing inspiration, the opportunity to sample products and enjoy omni-channel interactions.” At the end of 2020, the group operated 43 more stores than the previous year, for a total of 2,221 in over 110 countries, with an aggregate retail area of 790,000 m2. Of these stores, 140 are megastores, with an area in excess of 800 m2 each.
“Mango intends to rely on stores as focal points and to maintain or increase their numbers, deploying a strategy that blends online and physical retail,” he said, recognizing that “the potential is enormous.” Ruiz emphasised he is confident about the industry’s future. “We suffered the most in Mediterranean countries. But people will return to [physical] stores, they will start going out and shopping again, I’m sure,” he concluded with a smile.
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