Mango’s Toni Ruiz: “We don’t see ourselves as a fast fashion company”
Mar 12, 2020
2019 marked a turning point in the history and existence of Mango. Not least because, after three consecutive years of losses, the Spanish company is back in the black, but also because it managed to increase revenues to a record high of €2.37 billion in 2019. The stream of good news is reflected in the face of Toni Ruiz, who shows up to our meeting with the confidence of a student who has done his homework. On a sunny morning in Madrid, FashionNetwork.com talks with the brand’s top boss, who has been recently named CEO. We talk about the company’s latest financial performance, continued investment in design and quality and the impact of the coronavirus crisis.
FashionNetwork.com: How would you describe the company’s financial performance in 2019?
Toni Ruiz: 2019 was an extraordinary year. We achieved record revenues of 2.37 billion euros, an improvement of 6.3%, We have also grown across all channels (own stores, franchises and online), as well as across all categories (women’s, men’s and childrenswear). Store sales grew by 5.5%, which is a good number. Also worth noting is the growth of e-commerce, up 26.7%, beating our expectations. And the online channel is now accounting for 23.7% of revenues. The good thing is that we are selling more, but we are also operating at a profitable level and more efficiently. We have managed to return to profitability and cut debt, which we plan to restructure over the next three to four years. These results show that Mango’s financial health is the best it has been in the past 10 years. I am very pleased to have achieved these results without disregarding our future.
FNW: What were the steps involved in putting the company’s operations on the path to profitability?
T.R.: We are very pleased with our brand and product improvements. We are focusing on having a more coordinated, clear and coherent product offering. We have changed the way we manage the women’s division. Before, it was too compartmentalised, based on fabrics and product ranges, and now we have added a top layer that provides coordination and coherence, which has allowed us to streamline our offering. We have focused much more on our customers and reduced overlaps, both in terms of items and style. And this applies to larger stores as well as smaller stores, with a view to making our narrative, message and product more coherent. It’s very important that any Mango store exudes the same feeling.
Additionally, our product is cooler and the quality is better. We have invested in fabrics and introduced capsule collections that performed very well. These product improvements are reflected in our sales numbers. We have also invested in stores to make them more attractive. All of this is coupled with our data programme, digital transformation and better product information.
FNW: How has Mango’s product offering evolved in recent years, and is this reflected in terms of quality and price points?
T.R: We try not to see ourselves as a fast fashion company, we want to take the latest trends and present them to our customers in the best way possible. This is allowing us to be a little more daring in terms of design, delivering better value-for-money. All capsule collections received a good response from customers and I think we’ll continue to push in this direction. We have a long way ahead, and there’s lots of work to be done for some product ranges.
FNW: Can you share a breakdown of the financial results by categories? Following Violeta Andic’s departure last year, does the Violeta sub-brand continue to be a priority for the company and how does it differentiate from other collections?
T.R: The women’s collection, including accessories, generated 82% of total sales in 2019, reaching nearly the same level seen in 2018. The remaining 18% comes from the other categories. We still have some Violeta stores in France, but we have focused mostly on Spain. It is true that the lines between some products and collections have blurred, but we are making a big effort to make Violeta, which is developing very well online, appeal more to a younger and modern audience. The strategy has been to refresh Violeta and focus on the domestic market.
FNW: And does Mango continue to reshape its store estate?
T.R: Over the past few years, we have undertaken a major reorganisation of our store portfolio. We have now reached a point where it has become business as usual. We have 2,188 stores, but many leases are due to expire soon, and we have opportunities to relocate to new premises… but this is all part of our usual dynamics. We ended 2019 with five stores more than last year, and the idea is to continue to grow gradually as opportunities arise.
We have a clear commitment to 500 sq mt stores, also called megastores, which have enough space for the women’s collections as well as other propositions and categories. These stores are very good in terms of brand positioning. It’s true that in some countries, like Germany, we have been very successful within department stores. We are analysing how to leverage this information and considering a further rollout. What we want is to link up with big retailers, but there are markets where you have to adapt.
For us, the physical store is a space where you can interact with your customers. In Spain, 30%-35% of online orders are collected in store and 70%-75% of returns also take place in-store. The physical store is a key part of our current omnichannel strategy and will be more so in the future.
FNW: What are your biggest markets and growth ambitions?
T.R.: In terms of revenues, our largest market is Spain, which accounts for 23% of sales, followed by France, which is the second largest geography by far. Germany, Russia and Turkey follow behind. Europe accounts for nearly 70% of our revenues, and we believe there is great potential for us in these countries. But we are also identifying the cities and stores that could continue to improve. Mango always stood out from the crowd because of its expansion plans.
FNW: How do you integrate the offline with the online and how does it impact your profitability?
T.R: Developing an omnichannel strategy was always essential for us, to give people what they want. From a financial perspective, it costs less to sell an item in-store than online, where a series of operations power every transaction. Mango is not in a data race. Mango is selling more and more online, but we are doing things better from an operational perspective, improving returns and understanding our customers.
FNW: What is the ideal e-commerce share of retail sales?
T.R: This varies from country to country. Some mature markets react differently than others. It would be very complex to give you an exact answer, but I believe in having a vast array of options for consumers to choose from. I would say that between 25% and 30% would be great, and I’m not sure if it’s necessary to go any further than that. This is a decision that will depend on customers’ needs. I think we will end up talking more about our customers than e-commerce.
FNW: Mango has been slower to embrace RFID technology than its rivals. Is RFID a pending issue for the company?
T.R: Indeed, we are lagging behind other companies in the sector. We see it as a great opportunity. We have deployed this technology in Barcelona and Madrid, and we want to roll it out somewhere in France. The results have been spectacular. But we have also realised that data will change the way we do things. The idea is to deploy it in three years. We would like to do it quickly. We like in store technology that has an invisible quality.
FNW: At the unveiling of the new logistics centre in Barcelona, there was talk about the opening of more regional depots to support local deliveries. Is this project already underway?
T.R: We have 10 facilities that support online orders. We think it’s best not to have large inventories in-store, and instead supply products quickly from our warehouses; that way we can respond faster without relying on whether a product is available in-store.
FNW: How is the company preparing for coronavirus and how will the situation in China and Italy affect production and sales?
T.R: These are uncertain times and we don’t know exactly what’s happening. As for sourcing, we work with suppliers from Mediterranean countries and Turkey to companies in southeast Asia. Some 20%-25% of our production takes place in countries close to Spain, while the remaining 75%-80% occurs in Asia. We also have many collections that launch in Asia first, and then launch in Europe to meet demand faster.
There were a few weeks where we suffered supply issues in China, but it didn’t happen at peak times and production in China accounted for less than half of the total. However, at times we had capacity issues. Some garments had to be shipped by air to speed up the process. In other cases we had to rely on near-shore sourcing. We know there will be extra costs, but I don’t think they are significant.
Currently, Mango’s top five suppliers in China are operating at a minimum capacity. China has returned to normal in terms of sourcing, and Mango won’t have any more supply chain problems. We will have to see what happens in Italy, Spain or any other countries. It will be a completely new situation for us. But the question is not when it will happen but how long it will last. We are optimistic because we have seen that it has gone relatively fast in China, despite the complexity of the situation. Our stores in China have reopened, but the country represents less than 1% of our revenues, and 70% of that occurs online. Italy is not one of our most important markets. We are preparing for a scenario where the virus could continue to spread. And we are prepared to tell staff to work from home should the situation worsen.
The crisis finds us in a much better situation than in previous years. We are not listed, so we can manage things differently. If we had done an IPO, shareholders would have wanted faster growth but we wouldn’t have achieved it on our terms. We have a single shareholder, our president, so complex decisions can be taken quickly. And at the moment we are in good financial health.
FNW: What is the latest in terms of sustainability and how can Mango ensure its projects will have a real impact when most initiatives are non-regulated?
T.R: We are making a lot of progress on sustainable issues and I believe that if the entire industry cooperates, as a sector we will respond without the need for government impositions. I think it’s possible to make sustainable garments and earn a good living. We are doing it and our commitment is strong. We lack education, particularly at the point of sale. We are doing good things but we have to communicate them better, we have to improve.
FNW: How many women are employed by Mango and what is the ratio of women to men?
T.R: About 70% of our employees are women. At Mango we believe in equal opportunities. Most positions which are directly linked to product design and development are held by women. But there is room for improvement in our executive team, where there are several functional jobs. When you have meetings, one of the most surprising things in Mango is the young age of our employees and the female ratio. Our business is for women.
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