BARCELONA (Reuters) - Shoppers in the 109 countries where Spanish fashion chain Mango has stores recognize its celebrity faces well, but few know much about the company behind the clothes modeled by Kate Moss, Gerard Pique and Scarlett Johansson.
“Mango is from Spain, part of the Inditex group, isn’t it?” said Maria Lekae, 29, a Russian shopper browsing in the branch on Barcelona’s smart street Passeig de Gracia.
Her misconception that Mango is one of Zara owner Inditex’s (ITX.MC) cluster of brands is common. In fact, the 30-year-old Barcelona-based company is private and unrelated to the world’s largest retailer, based in Galicia, northern Spain.
That could change if Mango successfully implements a 10-year plan to break out from under the shadow of its larger Spanish competitor and equal Zara’s current level of sales, which topped 10.5 billion euros last year compared with Mango’s 1.7 billion.
“We began later than them, that’s why you need to give us 10 years to catch up!” Managing Director Enric Casi told Reuters in an interview at Mango’s headquarters and design center on an industrial estate 30 km from downtown Barcelona.
Mango has pushed out to even more markets than its larger listed peer, which opened its first store about 40 years ago. It aims to continue expansion at the rate of more than four new stores a week, entering four new countries this year.
It also said a new strategy to reduce production costs and prices of its clothes had halted a two-year profit fall, increasing net profit for 2012 by 82 percent to 113 million euros ($150.00 million).
Casi described how the firm recaptured European customers battling austerity, with designers creating less expensive clothes, less evening wear and more casual garments.
“In 2010, 2009, we made markdowns, but in 2011 we did so many we ate up half the profit,” he said.
“We now start with a lower price but without discounts or markdowns later.”
THE DANGEROUS MID-MARKET
Mango put prices alongside outfits in catalogues and advertising last year, in a similar way to H&M (HMb.ST).
Budget retailers such as Primark, owned by Associated Foods (ABF.L), have thrived during the economic slowdown as consumers buy cheaper clothes. Some luxury brands have also held up.
But the mid-market is suffering. Mango makes 16 percent of sales and has 326 outlets in Spain, which is racked by high unemployment and recession. Even veteran department store El Corte Ingles is suffering.
The market repositioning is paying off, with 2012 global sales up 20 percent and the firm back in profit after dropping 32 percent in 2010 and 38 percent in 2011.
Cheap labor in China, source of 42 percent of Mango clothes, and countries including Turkey, South Korea, Morocco and Bangladesh will remain a central strategy for the company, Casi said.
The collapse of a building in Bangladesh, killing 1,129 people has raised questions about conditions in producing countries. Forms for a Mango sample order were found in April in the rubble of Rana Plaza.
“Today, if you want to produce textiles, apart from the cloth, you know the countries of the world where you must buy and if you buy in other places you go wrong and you fail,” he said. “In China, they sew better than in Europe nowadays.”
Mango’s founders, the Andic brothers, Isak and Nahman, opened their first store at 65 Passeig de Gracia in 1984, when Casi worked as a consultant for them.
“It was an old fur shop and I remember we opened up so quickly we still had the name of the fur shop there and Mango’s sign in red letters,” he said.
Since then, Mango has notched up about 2,600 stores. By comparison, H&M has over 2,900, while Inditex has more than 6,000, of which over 1,700 are Zara.
The retail empire has made Mango President Isak Andic and his family the fourth richest in Spain, according to Forbes. Andic, who loves yachts and art, resists giving interviews.
“We’re now in another market, we’re competing with Inditex, with H&M, and we’re very satisfied,” said Casi.
Key to Mango’s 10-year strategy lies in developing a group of brands for men, children and older women, building on its Mango Touch accessories line started in 2011 and H.E. by Mango.
“It seems they want to use an umbrella brand and the doubt is whether they’ll have the ability to not only grow but also adapt their structure to this new strategy,” said Gerard Costa, marketing professor at Barcelona-based ESADE business school.
In Mango’s 12,000-square-metre design center El Hangar is a pilot shop where the display of the new formats is worked out.
Samples for the line Mango Kids, launching this summer, include gold hotpants costing 27.99 euros.
Mango also launches its Sport&Intimates underwear line this summer; next year, it plans to bring in lines targeting teens and mature women.
It aims for group sales of 1.98 billion euros by year end.
Additional reporting by Anna Ringstrom in Stockholm; Editing by Fiona Ortiz and Pravin Char