Adolfo Dominguez S.A. Business Information, Profile, and History

History of Adolfo Dominguez S.A.

Adolfo Dominguez S.A. is one of Spain's leading and most well-known fashion groups. The Oreste-region company designs and produces a full range of clothing for men's, women's, and youth segments. The company markets its clothing under the AD and Linea U brands, among others. In addition to producing clothing, Adolfo Dominguez also produces a range of accessory items and footwear, much of which is developed under license by third parties. Similarly, the company has its own line of perfumes to support its major labels, developed and produced by fragrance specialist Myrurgia. Adolfo Dominguez is a vertically integrated company, a position that has enabled the company to produce high-quality, fashion-oriented clothing at attractive price points. The company's vertical integration extends into the retail sector. Since the early 1980s, the company has built up a strong, internationally operating retail network of more than 300 stores. Of this total, 142 stores are company owned, with the remaining stores operated as franchises. Spain remains the company's biggest market, where it operates 93 company-owned stores and 137 franchise locations. Europe is the company's largest region, with 32 company-owned stores, and most of the group's 23 foreign franchised stores. France is the group's primary international market, but the company also has a presence in Germany and the Benelux markets, and elsewhere. Founded in the 1950s as a small tailor's shop, the company remains under the control of the Dominguez family, including longtime Chairman and CEO Adolfo Dominguez, the founder's son. The Dominguez family retains a controlling stake in the company, which was listed on the Madrid Stock Exchange in 1997. In 2004, the company posted total sales of EUR 130 million.

Expanding the Family Store in the 1970s

Adolfo Dominguez, Sr., opened a tailor's shop in Orense, Spain in the early 1950s, and remained a small, family-owned affair into the 1970s. By then, the elder Dominguez established a strong reputation in the Orense region for the quality of his men's suits.

Yet, the death of Adolfo Dominguez, Sr., in the mid-1970s placed the family-owned business at a crossroads. Dominquez's eldest son Adolfo Dominguez Fernandes had until then exhibited more interest for cinema and literature than for clothing, and had gone on to study filmmaking, and spent time in London. Yet, after his father's death, Dominguez returned to Orense and took over the business. As Dominguez told the Daily News Record: "I didn't have a special vocation to be a designer. I loved literature, art and cinema, but I realized that you had to do something in order to live, so I decided to become an entrepreneur."

Dominguez decided to extend the company's business beyond just tailoring. In 1976, Dominguez established a new clothing business, Adolfo Dominguez, specializing in high-end, although somewhat classically styled, men's clothing designs. Dominguez, then just 25, was joined by wife Elena, who became an important part of the young company's design team.

Dominguez's production at first targeted Spain's multi-brand retailers. The company sold its clothing through third-party commercial agents who brought its designs to the country's stores, and its shoppers. Into the 1980s, the company began to acquire a name for itself among Spanish consumers, and its reputation for the high quality of its clothing grew.

At the time, the designer brand trend had not yet taken hold in Spain. Dominguez became an industry pioneer, especially in his willingness to use advertising to establish the brand. In 1982, the company launched a highly successful advertising campaign, proclaiming that "wrinkles are beautiful." As a result, the Dominguez name became one of the most recognized names in high-end fashion in Spain.

The campaign coincided with Dominguez's launch into the retail sector. In 1982, Dominguez opened its first store in Madrid--becoming one of the first Spanish design houses to place its name on its own shop. The success of that opening, backed by the enthusiastic response to the company's advertising campaign, encouraged the company to open a second store in Barcelona by the end of that year.

Into the mid-1980s, Dominguez continued to play the role of Spanish fashion pioneer. Not content with its expanding sales in Spain, the company became determined to launch itself as an international design label. For this, the company turned toward the fashion capitals of London, Paris, and New York, opening designer showrooms in each market. The Paris store was the first to open, in 1985, followed soon after by the others. The company also began promoting its label to other retailers. In Italy, for example, the company placed its designs in more than 100 stores. The United States proved much more difficult to crack, however, and by the end of the decade, the company decided to shut its New York store.

If Dominguez's designs failed to inspire the Americans, the company had much more luck with the Japanese. In 1986, the company signed a two-year licensing agreement with Japan's Taka-Q to import the Dominguez label into that country. The agreement with Taka-Q turned into a full-scale partnership, as Taka-Q began opening the first franchised stores in Japan. In 1988, the two companies renewed their agreement, and Taka-Q added some 16 Adolfo Dominguez stores to its network.

Expanding Lines for the New Century

Dominguez had in the meantime expanded beyond its core menswear collections. In 1986, the company entered the women's fashion sector as well, releasing its first collection that year. Dominguez also began to extend the brand into a full range of accessories, including footwear, handbags, jewelry, and, in a licensing deal with Myrugia, perfumes. The company itself handled most of its accessories production, contracting out only for silks, from China.

By the early 1990s, Adolfo Dominguez had boosted its sales to more than $55 million, and its number of company-owned stores past 12, and franchised stores to 15. The company also had greatly expanded its Orense facility, adding four new factories to support its diversified production. At the same time, Dominguez expanded its labels, adding the casual look Dominguez Basico, and new line of men's clothing, Almacen Dominguez, featuring printed shirts, sweaters, and sportscoats.

Yet, disaster struck the company in 1991, when a fire destroyed its Orense headquarters. The company was forced to restructure and lay off nearly one-third of its employees. But Dominguez soon turned the disaster to its advantage. The company decided to adopt a vertically integrated structure--including taking on its own distribution, eliminating its wholesaler middlemen--and adopting just-in-time manufacturing techniques in its rebuilt factories.

Of importance, Dominguez also decided to convert the substantial cost savings gained through its restructuring into lower pricing policies for its clothing. Most of the company's clothing now could be sold for 30-40 percent less than before the restructuring, and even up to half the price. Yet the company was careful not to sacrifice its reputation for quality. These decisions helped Dominguez flourish despite the onset of a long economic recession in its core European and overseas markets.

Dominguez expanded strongly through the 1990s--by the mid-2000s, its Spanish retail network had grown to 93 company-owned stores, with nearly 140 more franchised stores. Into the mid-1990s, the company's foreign presence remained limited to its London and Paris stores. The company, with its reduced pricing in place, launched a renewed international expansion at this time, starting with the opening of its first store in Portugal in 1994. The company continued to build up its European presence, notably in France, then entered Belgium in 1997.

The company also began an expansion deeper into the Asian market, signing agreements to introduce its designs via a number of third-party retailers in Malaysia, Singapore, and Taipei. In 1997, the company attempted a return to the United States, this time through the opening of a number of in-store "corners." In the meantime, the company abandoned the Almacen Dominguez label in favor of a new casual label, Golf, launched in 1995.

Dominguez went public in 1997 in order to fuel its further expansion. The highly successful initial public offering was oversubscribed some 300 percent, and placed some 70 percent of the group's stock on the public market. Adolfo Dominguez himself kept his 30 percent stake and, together with allies, controlled a majority block of more than 50 percent of the company's stock.

This controlling block came into good stead in 2001, when rival Spanish clothing group Cortefiel launched a takeover attempt for Dominguez. In the end, however, Adolfo Dominguez and other shareholders rejected the offer, for some EUR 78 million ($72 million), as too low.

Dominguez now turned its attention to future growth. In 2001, the company launched a new youth-oriented label, Linea U, to compete with fast-growing competitor brands such as Zara, owned by Inditex, and Cortefiel. The company also continued in its attempt to add new markets, entering Argentina with its first store in the early 2000s. In 2002, the company again returned to the United States, this time opening a store in Miami. By then, the company had added operations in Mexico, China, and Luxembourg.

Like most retailers, Dominguez was hit hard by the global recession at the beginning of the 2000s. Nonetheless, the company remained one of Spain's leading fashion labels, backed by an international network of more than 300 company-owned and franchised stores. By the end of 2004, Dominguez had boosted its sales to EUR 130 million ($176 million). With Adolfo Dominguez remaining at the helm, the company set its sights on new growth in the new century.

Principal Subsidiaries: Adolfo Dominguez Arg. S.A. (Argentina); Adolfo Dominguez Belgique; Adolfo Dominguez GmbH (Germany); Adolfo Dominguez Japan Ltd.; Adolfo Dominguez Ltd. (United Kingdom); Adolfo Dominguez Lux. S.A. (Luxembourg); Adolfo Dominguez Moda Ltd. (Portugal); Adolfo Dominguez S.A.R.L. (France); Adolfo Dominguez USA Inc.; Trespass S.A. de C.V. (Mexico).

Principal Competitors: The Gap Inc.; Hennes & Mauritz AB; Benetton Group S.p.A.; Vivarte; Gruppo Coin S.p.A.; Kiabi S.A.; Inditex Industria de Diseno Textil S.A.; Somfy International S.A.; Cortefiel S.A.; Mango S.A.

Chronology

• Key Dates:
• 1950: Adolfo Dominguez, Sr., founds a tailor shop in Orense, Spain.
• 1976: Adolfo Dominguez, Jr., takes over the business and launches a men's designer clothing label.
• 1982: The company opens its first two retail stores, in Madrid and Barcelona.
• 1985: The company opens its first international store in Paris.
• 1986: A franchising agreement is reached with Taka-Q in Japan; a women's clothing line is launched.
• 1991: After fire destroys the factory, the company launches new production techniques and a low-pricing policy.
• 1994: The company opens its first store in Portugal.
• 1995: The company launches the sportswear label, Golf.
• 1997: A public offering is made on the Madrid Stock Exchange; the company enters Belgium.
• 2001: The company launches the youth-oriented label, Linea U.
• 2002: The company opens a store in Miami, Florida.
• 2005: The company operates more than 300 company-owned and franchised stores worldwide.