La Perla

MILAN — La Perla Fashion Holding N.V. may be operating in the red, but Pascal Perrier, chief executive officer of its main subsidiary, is upbeat about the advancement of its business transformation strategy, which was reflected in progressively improving results last year. The positive trends continued in early 2020 but were disrupted by the impact of the coronavirus.

In the 12 months ended Dec. 31, the innerwear and swimwear specialist reported a loss of 89 million euros, compared with a profit of 50 million euros in 2018. The company attributed this decline to a technicality because in 2018, due to the acquisition by Tennor Holding B.V., there was a 140 million euros waiver of the former shareholder loan – a one-off gain.  So in that instance that counts as a 140 million euros pre-tax gain.

For comparison purposes, operating loss last year improved to 72.7 million euros from 91.3 million euros in 2018.

Revenues decreased 19.2 percent to 85.8 million euros from 106.2 million euros in the previous year. Retail sales amounted to 74 million euros, compared with 94.8 million euros. The company attributed the decrease to lost sales from discontinued product categories which were not considered relevant to the brand’s new strategy. Also, sales were hit by a reduction in selling space due to the exit from retail locations with low productivity and a contraction in promotional activities. Perrier also pointed to production complications reducing the supply of fresh merchandise to stores, particularly during the first half of last year. However, these initiatives drove improvements in the performance in the second half of 2019.

“Our strategy to transform the business and revitalize the brand has shown encouraging results, demonstrated by the progressive increase in full price sales over the year and improved cost structure,” said Perrier. “New product lines have been well received by customers, while our marketing continues to evolve in line with our energy and vision to reach a broader, more inclusive customer base.”

During an interview, Perrier said he saw “incredible progress in the second half” last year, “the early stages of a turnaround, and especially positive in the last quarter.”

Like-for-like sales showed double-digit increases at full price compared with a decline in the first half. “This is very significant considering we closed many stores.” He lamented “constant markdowns, almost 80 percent of the total,” before the turnaround began.

The company counts around 100 stores and last year it closed 30 that were underperforming or in the wrong location. “We will begin opening new stores in 2020,” he said. In particular, the company is eyeing China, which is underdeveloped for La Perla, he said.

Wholesale also “recovered quite well as in the previous two years we were not delivering products or delivering them late.” Asked for the reason, he said “the company was not paying its suppliers.”

Perrier addressed the impact of COVID-19, “far-reaching for the industry,” and operating in “a changed landscape,” but expressed confidence in the strength of the La Perla brand and the company’s strategies to transform the business, planning to reduce expenses and defer investments. The group declined to provide a forecast for the year, given the uncertainties of the scenario.

The company has introduced shapewear, larger sizes for more inclusivity, and more loungewear and homewear, sustainable fabrics and washable silk. These have all been performing very well, also helped by the lockdown. “We believe that customers will spend more time at home whether by choice or obligation and this is an incredible opportunity for La Perla. We are adapting our product offer anticipating behavioral changes. Well-being was already a big value before the crisis as was sustainability and both will be more relevant going forward,” the ceo said.

Last year, losses before interest, taxes, depreciation and amortization were equaled 44.2 million euros compared with losses of 81 million euros in 2018.

La Perla’s restructuring activities included: re-establishing production and sourcing capability; streamlining its points of sale in order to focus on high-potential locations; improving the company’s inventory management, and simplifying and resizing the brand’s organizational structure.

The goal is also to modernize the La Perla brand to engage a broader audience and to boost its digital reach, while enhancing the retail experience.

“We are doing exactly what we said we would do,” said a pleased Perrier. In the second part of 2019, “we almost completed building our management.” He ticked off a number of roles, mostly new, that were filled, including chief financial officer; chief commercial officer; chief merchant officer; chief operations officer; chief people and strategy officers; chief marketing and customer engagement officers, and chief IT and e-commerce officers. “We launched a huge IT roadmap, some teams were working on Window 7 or with 40-year old [support],” he marveled. “It’s still a work in progress but IT is essential to run a business overall.” A new, entirely overhauled La Perla web site will launch in July.

In 2019, operating expenses were reduced to 86.1 million euros, compared with 124.1 million euros in 2018, mainly driven by adoption of the IFRS 16 accounting method, the effect of the retail space rationalization and organizational improvements.

The operational headquarters are now in London, but La Perla’s design, research, development and production facilities continue to be located mainly in Bologna, Italy. The company has rationalized its structure to focus on its core business. While pledging to keep production at its headquarters in Bologna, the company had planned to let go of 126 employees out of a total of 400. Perrier said the redundancy plan was finalized last year in a “smooth” manner with the unions and that the final number of employees that were let go was less than 100. The cost of the social plan and the redundancies around the world, but mostly affecting Bologna, totaled 7 million euros.

La Perla has been enabling working from home but production resumed two weeks ago as the lockdown in Italy was eased. “Our employees were very happy to return to work, we have been careful to protect our teams globally. Out of 1,250 employees, only three or four were infected in a moderate way with mild symptoms,” said Perrier.  La Perla donated 10,000 protective masks and sanitizing gel to the city of Bologna.

The company launched the La Perla Beauty subsidiary to capitalize on the brand’s opportunity in the fragrance, color and skin-care categories.

In September last year, La Perla Fashion Holding NV listed its shares on the Euronext Growth Market, operated by Euronext Paris, at a market capitalization of 473 million euros. The holding owns 100 percent of the La Perla brand and the plan is to “proceed with further investments and creating a luxury entity” within the holding, said Perrier, but “we are cautious, we are looking at projects but we are not in a hurry in a market that is changing rapidly.”  He reiterated the listing was “technical” with limited share trading, to raise the profile on a listing platform dedicated to growth as investors were keen to invest in strategy and raise capital.

The Amsterdam-based private equity firm Sapinda Holding B.V. took over La Perla in February 2018, hiring Perrier and promoting Alessandra Bertuzzi to head creative designer after the departure of Julia Haart. Sapinda Holding bought 100 percent of the company from the Italian entrepreneur Silvio Scaglia, who had controlled La Perla since 2013. La Perla describes itself as wholly owned subsidiary of Tennor Holding B.V., a global investment holding company that takes majority and minority stakes in public and private firms, as well as in public and private debt instruments. It is also an indirect majority shareholder of La Perla Global Management U.K. Ltd., the head office of the La Perla operating entity.

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