Spain's next Zara? Fashion label Desigual speeds global growth

BERLIN Thu Jan 16, 2014 7:26pm IST

A woman hands out bags at the booth of Spanish fashion brand Desigual at the Bread and Butter fashion trade show at the former Tempelhof airport in Berlin. REUTERS/Tobias Schwarz

A woman hands out bags at the booth of Spanish fashion brand Desigual at the Bread and Butter fashion trade show at the former Tempelhof airport in Berlin.

Credit: Reuters/Tobias Schwarz

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BERLIN (Reuters) - Spanish fashion label Desigual is accelerating its expansion in Europe and emerging markets, seeking to ride predictions of fast growth in women's apparel while also taking the colourful brand into new areas like perfume and shoes.

The Barcelona-based company has gained a reputation for bright garments and bold marketing, offering free clothes to shoppers who arrive in their underwear to special sale parties.

After expanding outside Europe three years ago, it is now targeting sales of 1 billion euros this year - from about 820 million in 2013 and 440 million four years ago - and plans to add 100 stores a year for the next three years.

It is all part of managing director Manel Jadraque's master plan to build a powerhouse brand to rival those of French luxury group LVMH (LVMH.PA), where he worked for a decade before joining Desigual as director of operations in 2004.

"In the next three years we plan to grow about 20-25 percent a year. The big idea is to double the company every four years," Jadraque, 44, said in an interview during Berlin fashion week.

Consultancy McKinsey predicts the global women's apparel market will grow almost 5 percent a year by 2025, up from a historical average of just over 3 percent, with emerging markets accounting for over half of sales from 37 percent now.

"The market for fashion will double in the next 10 years," said Jadraque, who was wearing one of Desigual's trademark asymmetrically patterned shirts. He said he saw room for competition between 20 companies like Zara-owner Inditex (ITX.MC), which has grown fast to become the world's biggest clothing retailer with more than 6,000 outlets.

Hence Desigual's move into cosmetics, homeware, sports and shoes in the last two years as well as its drive to open stores in travel locations like airports, train stations and hotels.

"It is an upgrade for the brand to be in more channels," Jadraque said. "For a brand, the most important factor is to have presence in the market."

EVERY WARDROBE IN THE WORLD

Founded in Ibiza in 1984 by Swiss designer Thomas Meyer - still the company's sole shareholder - Desigual says its mission is to put at least one item into every wardrobe in the world. To that end, as well as growing its existing 400 stores, it plans to multiply concessions in department stores and increase Internet sales to a quarter of total turnover from about 10 percent now.

Jadraque, who took over as managing director in 2012, said Desigual would concentrate on locations where the brand is doing best after expanding to 60 new countries in three years.

"We want to focus on fewer countries but on penetrating more," he said. "Asia is tough. They have different tastes from Europe but South America is doing well."

Jadraque, who planned to visit potential new locations during his visit to Berlin, still sees plenty of room to grow in Europe and will be making a big push in Germany this year, where he plans to add 20 more stores to the current 40.

Desigual, which currently sources about 80 percent of its goods from China and India, plans to increase production in Europe as it seeks to improve quality, he added.

Jadraque was optimistic about the economic recovery in Spain, where Desigual expects to hire 200 of the 1,000 new staff it wants add to its team of 4,000 employees this year.

"The Christmas period was the best of the last four years," Jadraque said, adding growth would be slow this year but should pick up in 2015.

"This crisis transformed the mindset of people in Spain. Companies and managers are focusing on exports ... emerging markets, innovation. A lot of things are happening."

(Editing by Sophie Walker)

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