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Despite Strong Sales, Tod’s ’02 Net Falls

Tod’s 2002 net income dropped 2.5 percent to $38.3 million on a 12.5 percent sales increase to $382.8 million, satisfying its chairman.

MILAN — Tod’s 2002 net income dropped 2.5 percent on a 12.5 percent sales increase, but the slightly weaker profit showing was attributed to financial items rather than any lessening of its market strength.

Diego Della Valle, chairman, pronounced himself satisfied with net income of $38.3 million and sales of $382.8 million last year.

“The 2002 results are certainly positive for the group and are among the best, relatively speaking, in the luxury goods industry,” said Della Valle in a statement. “This performance affirms the health of the group.”

The company attributed the drop in net income to a drop in interest income compared with 2001, when it benefited from interest on its initial public offering proceeds, as well as a higher tax burden in 2002.

Earnings before interest, taxes, depreciation and amortization grew 13.9 percent to $98.1 million, representing a 25.6 percent margin on sales. Earnings before interest and taxes grew 12.7 percent to $67.6 million, representing 17.7 percent of sales. The margin represented “slight growth” compared with the year before, notwithstanding hefty amortization costs related to the expansion of its retailing network and the opening of direct stores. Dollar figures are converted from the euro at current exchange rates.

Emilio Macellari, chief financial officer of the company, said that sales of the Tod’s brand grew 8.5 percent last year, while Fay and Hogan leaped 28.6 percent and 11.4 percent, respectively.

Della Valle said the group’s brands “remain strong and have a great potential for growth.”

Sales in the U.S. were up 2.7 percent, but would have expanded 6 percent if not for the weakening of the dollar against the euro.

European sales gained 16.6 percent, while those in Asia and the rest of the world grew 25.5 percent.

In a phone interview, Macellari said it was difficult to make any projection for the current year. “We are cautious,” he told WWD. “This is a difficult moment to read, since the market and the economic situation are worsened by the war. We have reevaluated our strategies and believe they are still valid. After all, this moment is bound to pass.”

This story first appeared in the March 31, 2003 issue of WWD.  Subscribe Today.

Macellari said he felt Tod’s products were performing well, in part, because “they are classic but in step with fashion. So they are not considered too trendy and are not quickly out of style. They may cost more, but they last longer and are easily worn on more than one occasion.”

In 2002, the group’s workforce grew by 200 people to 1,715 employees, and the cost of labor escalated 14.2 percent.