In the six months ended June 30, the Italian luxury goods group registered a 3.4 percent decline in sales to 497.6 million euros, or $557.3 million, compared with 515.3 million euros, or $603 million, in the same period last year. At constant exchange rates and including the related effects of hedging contracts, sales would have been down 4.3 percent. Full financial figures will be released on Sept. 14.
“First half 2016 sales figures reflect an industry and market environment still characterized by instability and uncertainty,” said chairman and chief executive officer Diego Della Valle. “Even in this scenario, our plan of development continues: We are investing for growth in the coming years with ever more innovative products and with a very important marketing and communication strategy, on all channels. At the same time, the cost rationalization and containment is proving successful.”
In March, Tod’s said it was scaling back its store-opening program, and Della Valle pointed to this strategy on Thursday, commenting on the first-half results. “The development of the distribution network continues with caution: We are considering only the most particular and necessary locations; the primary goal is to improve the organic growth,” he said. “The new products of the winter collections, which are coming in the stores, are welcome by the consumers and the market, confirming that we are on the right way. Therefore, we are continuing in this direction.”
The group’s core Tod’s brand posted a 7.2 percent decrease in sales to 282.5 million euros, or $316.4 million, mainly due to a sharp fall in tourist spending in Europe and the U.S. and to the persistent weakness of the Greater China market.
Hogan sales dropped 2.5 percent to 106.1 million euros, or $118.8 million, mainly due to a local and tourist slowdown in consumer spending in Italy in the second quarter.
Fay was up 8.8 percent to 24.9 million euros, or $27.8 million, lifted by growth in all geographic areas. The company noted a double-digit growth in Asian markets, where volumes are still not very significant.
Sales at Roger Vivier rose 6.2 percent to 83.4 million euros, or $93.4 million, growing globally except in America. The apparent slowdown in the second-quarter growth rate was caused by a different timing in deliveries, said the company, which released the figures following the close of trading in Milan, where it is publicly listed.
The core footwear category was down 2.5 percent to 400.3 million euros, or $448.3 million. The company underscored a “very challenging comparison basis, linked to the different timing of deliveries.”
Leather goods and accessories decreased 10.7 percent to 69.3 million euros, or $77.6 million. “The figure for the first half reflects the negative trend of a part of the Tod’s collection,” said the company.
Sales of apparel rose 3.7 percent to 27.3 million euros, or $30.5 million.
Revenues in Italy, the group’s largest market, dropped 2.7 percent to 148.8 million euros, or $166.6 million, mainly affected by the Hogan performance.
In the rest of Europe, sales were down 1.7 percent to 120.1 million euros, or $134.5 million, mainly due to a sharp slowdown in consumption, especially by tourists, registered in the second quarter for the entire sector, in addition to a very challenging comparison basis, as sales were up 22 percent in the second quarter last year. Reflecting the industry’s general woes, the weakest countries were France and the U.K.
Revenues were down 6 percent in the Americas to 48.7 million euros, or $54.5 million, as a consequence of the sharp slowdown in the second quarter.
Sales in Greater China dropped 9.5 percent to 107 million euros, or $120 million, dented by ongoing weakness in Hong Kong. Sales in Mainland China, which represents slightly more than half of this region, were “slightly negative.”
In the “Rest of the World” area, sales gained 4.1 percent to 73 million euros, or $81.7 million, mainly driven by Korea.
Dollar figures were converted from the euro at average exchange for the periods to which they refer.
Revenues at directly operated stores dropped 4.9 percent to 311.2 million euros, or $348.5 million.
The same-store sales growth (SSSG) rate, calculated as the worldwide average of sales growth rates at constant exchange rates registered by the directly operated stores already existing as of Jan. 1, 2015, was down 14.3 percent in the first half, reflecting weak consumer spending and the global luxury slowdown.
As of June 30, the group had 261 directly operated stores and 103 franchised units, compared to 251 directly operated stores and 93 franchised ones at the end of June last year.
Revenues to third parties totaled 186.4 million euros, or $208.7 million, down 1 percent.
Della Valle has been mapping out strategies to fuel future growth. In May, he said the role of a creative director is over at Tod’s. “We do not need the designer in the classic sense, for us, because I think that figure has become, except in some cases, a bit of a hindrance to projects,” he said at the time. Tod’s parted ways with women’s wear designer Alessandra Facchinetti earlier this year, as reported.
Della Valle said he was overhauling Tod’s to eliminate seasons, and will instead generate new product on a monthly basis to create regular news for the digital media mill and fresh items for stores. The entrepreneur warned that a new order in the fashion system was bound to emerge within the next few years. His company will complete its own transformation by the end of the year.
“I believe that not one of us can think anymore season to season,” he said. “The entire business model truly is changing.”
Luca Solca, head of luxury goods at Exane BNP Paribas, said, “Tod’s continues to suffer in its core business, and does not seem to have yet found a way to restart sales. Granted, the market is difficult but it is nonetheless rewarding those that succeed in innovating (Gucci) and in keeping desirability high (Hermes). Tod’s does not seem to be part of either group.”