Diego Della Valle of Tod’s SpA takes a long-term view in a short-term business.
Tod’s chairman and chief executive officer has a conviction: If he wanted his cashiers to ker-ching faster and louder, he could do so in the blink of an eye. “We could triple our sales by inventing new products, new licenses and new distribution channels,” he said. “The numbers would soar, but that approach wouldn’t be serious or coherent with the group’s growth strategy for the next 10 years.”
Della Valle might prefer a steady-as-she-goes approach, but he’s upping its tempo in the months ahead. Tod’s will continue to expand its collections of small leather goods, leatherwear, jewelry and other products while introducing new categories such as sunglasses. It also is strengthening the management team at its other brands, Hogan and Fay, with the appointments of new brand managers and creative personnel.
But while Tod’s has opened 38 stores in the past 18 months, don’t expect to see any explosive expansion at the company. That’s not the Della Valle way. “The market is replete with products, consumers have everything, so we owe them something special. We must never betray their expectations, which, in our case, means the best leather quality and a modern product that isn’t slave to dates,” he said. “This may require more time, but once the products hit the market, we realize that the consumer respects the fact that we live up to their desires.”
A staunch opponent of the mergers and acquisitions fury that galloped through the fashion business in the late Nineties, Della Valle’s business acumen goes well with the adage, “A journey begins with a single step.” But that’s not to say Tod’s future growth is at stake, as some analysts have suggested considering the brand’s products focus primarily on shoes and bags.
“The litmus test and stock market response of how we’ve prepared for the future will be visible in the second half of 2005,” Della Valle said, speaking primarily for the Tod’s nameplate, which is still the group’s cash cow at 59.5 percent of its sales of $450 million. Heavy investments in its store network contributed to a 28.2 percent drop in net income at Tod’s last year to $31.4 million, or 25.8 million euros, versus $43.8 million, or 35.9 million euros, in 2002.
This story first appeared in the September 20, 2004 issue of WWD. Subscribe Today.
Della Valle’s formula to stand out in the crammed universe of luxury goods consists of three rigid rules: Don’t dilute the brand, don’t logo products that aren’t coherent with the brand’s philosophy and don’t over-expose the products because, in the long run, it kills the brand.
“Our vision for Tod’s may require more hard work, but it’s one that has gradually turned us into one of the few real luxury brands worldwide,” Della Valle contended.
Growth for the 50-year-old businessman, who launched the first pebbled-sole driving shoe in 1978 and now makes custom-made bags for Charlize Theron and puts Madonna on a waiting list, will come on a number of different fronts:
- Consolidating Tod’s core business of shoes and bags.
- Filling out the accessories with focused collections of jewels, small leather goods, scarves, hats and gloves, leatherwear and possibly sunglasses.
- Upping Tod’s presence in Asia, a market that currently represents only 10 percent of sales.
- Exploiting the brand’s bullish retail expansion over the past couple of years.
- Raising international awareness at Hogan and Fay.
Della Valle cited small leather goods as the market with the most short-term potential.
“For many of our competitors, small leather goods are a large portion of sales. We’ve just started but the moment we expand this category, we’ll get a huge response,” said Della Valle, sitting in his marble and stucco Milan headquarters. “I think we need another year before the consumer perceives that we are specialists in other sectors, too.”
As for jewelry, Tod’s metal bangles covered in colorful python and crocodile skin bridge the gap between costume and “haute joiallerie,” said Della Valle.
“It’s a way to make beautiful things at accessible prices. Someone who buys a Tod’s bracelet feels instantly gratified because it’s an identifiable object and not the cheaper piece at a high-end jeweler. In our consumer’s mind-set this has an added value,” said Della Valle.
He takes a similar view of the last plank in the company’s product-diversification strategy — leatherwear.
“These pieces will represent our consumer’s wardrobe staple, dedicated to a man or a woman who already wears our accessories,” said Della Valle.
Spring’s styles include versions of the fitted leather jacket with Tod’s ubiquitous rubber dots in outerwear; a colorful, laser-cut rendering in suede and elk of its D Bag, Tod’s first-ever bag launched in 1997 and named after Princess Diana, and, in footwear, variations on the ballerina theme.
Following the success of February’s show, Della Valle will again present his new wares at the PAC, Milan’s museum of contemporary art. This time, set designer Dante Ferretti has traded last season’s romantic side for a surreal effect.
“This is Tod’s way of presenting the collections. It’s modern, it represents a small dream and it’s a vehicle to follow the collections’ evolution,” said Della Valle. “I think Milan lacks the glamour of 10 years ago, although fashion week is well organized and filled with good names. What’s missing is a special and international event that would charge up the industry and make people happy to attend, even if it’s work-related. The press needs to be stimulated, and designers should be less conventional in these hard times.”
All the new categories will find a home in Tod’s new and improved network of 105 directly operated stores, plus 30 franchised ones.
Della Valle admitted the retail rollout has compressed the group’s margins, partially because its execution was accelerated by the recession. Tod’s had to capitalize on the fact that the economic downturn provided good locations at reasonable prices.
“However, we’ll absorb the investment starting with the first half of 2005 when the new stores will carry more merchandise and new categories,” Della Valle predicted.
Sunglasses could soon be a new entry, obviously à la Della Valle. “We’re looking into buying a small eyewear manufacturer because this is an important market, albeit an inflated, saturated and commercial one. I’m looking for an alternative approach to selling eyewear, perhaps a top-quality item only sold in our sales point since we don’t license,” Della Valle said.
The term licenses really don’t belong in Tod’s vocabulary.
“I just don’t love them because if it’s true that they bring cash flow — and maybe it’s a sacrifice to give that up — in the long run, licenses dilute the brand’s image and respect,” noted Della Valle, adjusting his staple horn-rimmed glasses.
To that end, Della Valle is also fed up with the abuse of the word “luxury.” “Even jeans makers talk about luxury. I think it’s a way to draw advantage from the price multiples that pertain to the luxury goods world,” he said.
High prices work if they’re the consequence of fine craftsmanship, a quality intrinsic to the Made in Italy label, Della Valle added.
“I have no problem with brands that outsource to China or India if they guarantee the quality and make it clear to the consumer,” he said. “I don’t want the Italian production to be depreciated because, at least in accessories, it is the best in the world, period.”
To prove that, Della Valle invested between $48 million and $61 million in this spring setup, what he describes as the “biggest factory of luxury shoes in the world,” a state-of-the-art plant in Casette d’Ete, Italy, that churns out more than two million pairs of hand-finished shoes annually.
That said, he didn’t rule out farming parts of Hogan because “I would be guaranteeing both fair prices and quality.”
To boost Hogan’s international appeal, a new brand manager is poised to join, as did Carmen Borgonovo, the newly appointed fashion coordinator and former accessories editor at W and editor in chief of W Jewelry. Cristina Cortesi has joined the Fay apparel division as general manager. Meanwhile, Noona Smith-Petersen will join the Tod’s Group as global director of corporate public relations worldwide for all of the group’s brands: Tod’s, Hogan, Fay and Roger Vivier, starting in mid-October. Smith-Petersen currently is with Calvin Klein Europe.
When asked whether his other interests — the Fiorentina soccer team, sitting on the board of directors of Ferrari, Maserati, Banca Nazionale del Lavoro and LVMH and owning a stake in RCS publishing company — are distractions, Della Valle shakes his head.
“It’s all low-commitment stuff. I go to the football match on Sunday, but 95 percent of my time is here. This is my full-time job,” smiled Della Valle.