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Mango falls into the red

Spanish fashion chain Mango has posted a 54.7% plunge in EBITDA for its 2016 financial year, with currency rates among the factors denting margins.

EBITDA tumbled to €77m (£70.1m) from €170m (£155m) in the year to 31 December, resulting in a loss of €61m (£55.5m).

The company said profit was affected by “lower than expected sales” during the first half of 2016 and costs associated with setting up up a “more ambitious fast-fashion model”. 

It added that it was hit by “the negative behaviour of key currencies”, namely the revaluation of the US dollar and the drop in value of the Turkish lira and Russian rouble.

The business said it “forecasts a return to profit in 2017” and expects to post EBITDA exceeding €150m (£136.6m), citing an upturn in sales which began in the last quarter of 2016.

Turnover for the year stood at €2.3bn (£2.1bn). Online sales grew by 25.6% to €294m (£268m), representing 13% of total sales. It is targeting 20% of total turnover by 2020.

Its Man, Kids and Violeta lines represent 17.6% of turnover, compared with 14.7% in the previous financial year.

Mango is in the process of opening big stores while closing its smaller stores. It opened 24 last year, bringing its total number of “megastores” to 191.

The company said in the six months to 30 June this year, EBITDA  increased by more than €30m (£27.3m) on the back of its new store format.

At the close of 2016, the firm had a total of 1,167 franchises globally. Mango said it will continue to add new franchise space.

Mango operates 2,217 stores in 110 countries. It decided not to renew its deal with US department store JC Penney, where it operated 440 concessions.

Mango executive vice-chairman of Mango Daniel López said: “In 2016 we have progressed in the process of transforming the business model of the company, which has resulted in a reduction in our EBITDA and, as a consequence, sacrificing the profit this year. The first results of this decision have been visible since September 2016 and give us optimism for 2017.”

 

 

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