“We want to work only with suppliers adapted to current market conditions, flexible in terms of both product range and payment deadlines,” said the Chairman of Flamingo International, Dragos Simion.
The company entered a process for renegotiating all contracts, planning to cut operating costs by at least one quarter. For the same purpose, the firm will continue closing small shops with a poor performance.
“The Flanco World network remains our bet in the medium and long-term. The sales area is some 1,500 square meters per store, and I believe this is the winning solution in Romania,” said Jiri Rizek, Chief Executive Officer (CEO) of Flamingo.
The company plans to maintain the same level of retail sales, which make up 60 percent of the business. “The distribution segment, business to business sales, will be most affected this year. We see a 50 percent drop in this sales channel. This segment makes up less than 40 percent of the business,” said Simion.
For 2009, Flamingo computed its budget based on a RON 4.5/€1 exchange rate for the first six months, and on a RON 4.7/€1 exchange rate for the second half.
For the Easter holidays, the second season retail market peak of the year “promotions will no longer be very spectacular, because we have no margin we can cut. In this business, mark-ups are usually 20 percent, at best. Promotions sell volumes, but sacrifice profit,” said to the company’s CEO.
Flamingo International posted €203 million in net sales in 2008, up 16 percent year-on-year, and a net loss of five percent of net sales. “The crisis came suddenly and hit [the market] head-on in the fourth quarter, when sales declined 18 percent compared to the final quarter in 2007,” Simion said, adding that the company needs four-five months to recover after the Q4 drop.
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