How Il Passo cut costs in a year when one could feel cash had run out

Pestos, the Romanian-held footwear and accessories retailer that owns Il Passo brand and franchises for Tosca Blu and Bagatt stores, for the first time in the ten years it has operated domestically saw its sales drop by 35% in euros.

The reason? RON decline, partner (malls and banks) inflexibility, but also the warm weather of October and November that hurt sales of last collection footwear, according to the company’s representatives.

The decline started being felt in late 2008, problems aggravated in March and the autumn/winter 2009/2010 season is marked by the same steep drop.

“The stores of Bucharest are more seriously hurt than those of other cities (…) One can feel the cash has run out and the instability, particularly in the budgetary sector,” Petru Chiriac, one of the two shareholders in the company with 4.9m-euro turnover in 2008, up 30% year-on-year, told ZF.

The retailer tried to counter the crisis fallout through internal measures, slashing expenses by as much as 30%, but also through discussions with shopping centres on rent cuts or with banks.

At present, the company owns eight Il Passo multibrand stores. As regards the two franchises, the company did not embrace aggressive expansion and preferred, in the case of Bagatt products to create corners inside Il Passo stores.

Although in November it opened an Il Passo store in Cotroceni, the company has no other concrete plans for the future.

“Shopping centres will still be basic. Romania is the only country where malls are positioned in the centre of cities. I don’t know how many of them will still operate in the future or how many will bring constant traffic, but this is retailers’ best alternative,” believes Chiriac, while admitting he will never again see the 30% sales increases of late 2007, early 2008.

“For this year, we estimate the same turnover in RON (18m RON). In spring-summer we’ll have the same results, maybe 10% higher, but we’ll try to cover accumulated debts and losses and we’ll see the first increases as late as next autumn,” Chiriac says.