Currency fluctuations affected the performance of Tod’s SpA in the first half of 2018 with the Italian luxury group reporting a 2.8 percent decrease in net profit to 33.7 million euros [$39 million] from 34.7 million euros [$40.2 million] in the same period last year. Even so, Chairman and CEO Diego Della Valle said he was “confident” about the group’s performance in the coming months, saying he believed it “will achieve good results in the current year.”
Sales decreased 1.3 percent to 477 million euros from 483 million euros in the first six months last year. At constant exchange rates, sales grew 1.8 percent.
“Today’s results are a first validation that the strategy, announced during the last Investor Day, is beginning to work; at constant exchange rates, both Tod’s and Roger Vivier’s revenues have returned to growth. We are collecting the first results of the work already done and that we intend to consistently carry on in the future,” said Della Valle, noting that the new collections in stores “are receiving positive feedback from our customers, who appreciate — as always — their high quality and their good taste, combined with a stronger and stronger component of creativity, needed to attract new clients.”
The group is also banking on improving its online sales and, to this end, said Friday that the board approved the purchase of Italiantouch Srl from its related company, Diego Della Valle & C. Srl, for 25 million euros. Italiantouch, which has sales of 21 million euros, is an e-commerce company, which, from the end of 2012, through its technological platform, sells the group’s products online. The transaction aims to internalize the experience of Italiantouch to accelerate the sales growth of the e-commerce channel; it will be completed during the month of September.
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“This is a very important step for an omnichannel [structure], having the same entity powering all businesses online,” said CFO Emilio Macellari during a conference call with analysts. The acquisition will allow the company to leverage synergies and incorporate margins, he explained. Macellari said the total e-commerce business of the group, including partners such as Net-a-porter or LuisaViaRoma and JD.com, accounted for 4 percent or 5 percent of sales and the online business at Italiantouch for the past three years grew at a very strong double-digit pace: “more than 20 percent.” The executive observed that a digital strategy “demands a particular attention to dialogue with clients” and to the fact that the acquisition will allow it to have full control of the value chain and help the group be more effective. “In a reasonable time, a couple of years, online sales of 4 percent to 5 percent will be at least twice that by combining all the activities together.”
In the six months ended June 30, sales of the Tod’s brand decreased 3.4 percent to 256.2 million euros. At constant exchange, sales inched up 0.1 percent. The label recorded positive results in its retail network in the second quarter of the year, which offset the weakness of the wholesale channel. The fall 2019 collection is registering good results, said Macellari.
Hogan revenues grew 6.5 percent to 105.2 million euros, lifted by a solid double-digit growth of sales in Europe and China, markets where the internationalization of the brand is focused. This more than offset the weakness of the Italian market. “Hogan benefited from a different attitude and more on-time deliveries,” Macellari said.
Sales of Roger Vivier decreased 2.3 percent to 90.4 million euros. At constant exchange, they rose 2.6 percent. In line with expectations, shoes recorded positive results in the second quarter with the real start of sales for the summer season. In March, Roger Vivier appointed Gherardo Felloni as new creative director, with his first official collection to be presented in September; he succeeds Bruno Frisoni.
Fay revenues decreased 4.7 percent to 24.7 million euros, due to the weakness of the domestic market.
Asked about T Factory, Tod’s capsule project announced by Della Valle earlier this year, Macellari said it will “benefit from external talent,” adding to the “historical, classic and iconic designs,” but he did not want to “stress this too much: The contribution in the second half will be more qualitative than quantitative.” The pieces will be found in stores from October. “We want to understand if the direction is right, if it can really represent an additional contribution, but our regular collections will continue to be present,” Macellari said. Della Valle said the “new management team we have chosen to develop our new business model is already partially in place and will be completed soon.”
In the first half, earnings before interest, taxes, depreciation and amortization totaled 68.6 million euros, down 9.4 percent as a result of external productions costs; labor costs increased with an additional 119 employees for a total of 4,725 employees as of June 30. Macellari pointed to a turnover that was “similar” last year but impacted by a higher number of stores.
Operating profit dropped 11 percent to 46.6 million euros.
By category, shoes were down 0.7 percent to 383.7 million euros. At constant exchange rates, they rose 2.4 percent.
Sales of leather goods and accessories decreased 3.7 percent to 65.5 million euros, picking up in the second quarter. At constant exchange, they edged up 0.4 percent.
Apparel was down 3 percent to 27.3 million euros, reflecting the Fay brand.
Sales in Italy decreased 4.8 percent to 138.3 million euros, mainly affected by a weak wholesale channel, especially in provincial cities.
In the rest of Europe, revenues grew 4.7 percent to 125 million euros.
In the Americas, revenues dropped 9.8 percent to 36.5 million euros. At constant exchange, they rose 0.5 percent.
Greater China was up 0.6 percent to 109.1 million euros. At constant exchange rates, sales rose 6.3 percent, lifted by positive results in mainland China, Hong Kong and Macau. Asked about the Chinese cluster, Macellari said it was “flattish” and that they buy more at home and “spend less money while traveling.”
Macellari emphasized the importance of Russians, who are returning to buy abroad, helped by a favorable currency.
In the rest of the world, revenues decreased 1.8 percent to 68 million euros. At constant exchange, they rose 2.7 percent.
Sales through directly operated stores were down 3.5 percent to 299.7 million euros, or up 0.4 percent at constant exchange.
Macellari said Hong Kong and Macau particularly lifted the retail channel, followed by China — even though “less so,” he stressed, and that South Korea and Singapore also improved.
Like-for-like sales were down 2.2 percent, but Macellari said the trend was “for sure progressively improving.” He said July is also “on trend” and improving.
As of June 30, the group counted 285 directly operated stores and 122 franchised stores, compared to 270 and 108, respectively, at the end of June last year.
Revenues to third parties grew 2.8 percent to 177.2 million euros. Macellari said the wholesale channel was improving “because of a timing effect,” but he said it could be negative by the end of the year. “We are fine-tuning the ability to face the market demand; we have changed the attitude of seasons and will deliver more than twice a year and anticipate the production cycle.” But the wholesale channel “is not having a positive momentum, particularly in Europe and the U.S. and predominantly in Italy.”
In the first six months of 2018, the group invested 20.1 million euros in tangible and intangible fixed assets, compared to 16.4 million euros in the first half last year, mainly channeled into the widening and updating of the network of directly operated stores, such as the renewal of the Tod’s boutique on Sloane Street in London.
Macellari said the consensus of sales of 960 million euros over the year was “absolutely fair” and that an EBITDA margin of 16.5 percent was “achievable,” although “ a bit more challenging than sales.” He called it, however, “absolutely fair” at constant exchange rates.
This story first appeared on wwd.com.
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