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MILAN — Tod’s Group on Wednesday reported a double-digit increase in first-half net income on the back of strong sales at the namesake brand, increased demand for its shoes and bags in America and China, and an “improvement” in the group’s tax rate.
This story first appeared in the August 9, 2012 issue of WWD. Subscribe Today.
Tod’s — home also to Hogan, Fay and Roger Vivier — said net income in the first six months increased 13.7 percent to 74.4 million euros, or $96.5 million, as sales increased 9.8 percent to 482.5 million euros, or $626.1 million. The company said its tax rate decreased by 300 basis points compared with January to June 2011 “mainly due to the higher incidence of foreign sales on the group’s turnover.”
Dollar amounts have been converted at average exchange rates for the periods to which they refer.
The Tod’s brand drove growth in the period, with sales up 19.4 percent at 286.2 million euros, or $371.4 million, more than compensating for sales declines at Hogan (down 12 percent) and Fay (down 8.1 percent), which — “as already commented in past press releases,” the company said — were affected by a wholesale rationalization in Italy. Sales at Roger Vivier of 32.7 million euros, or $42.4 million, surpassed those at Fay for the first time.
While not offering a breakdown of quarterly results, the company said it had achieved a “significant acceleration” in the second quarter, driven by the Tod’s brand and the “outstanding results achieved” by the group’s directly operated stores (DOS) network.
Chairman and chief executive officer Diego Della Valle said that, given the company’s results and strong performance in the U.S. and Asia, he was “confident that also the second half of the year will achieve good results, and I can confirm our expectations to post a significant growth also this year.”
In the six-month period, the producer of high-end shoes, accessories and apparel said that earnings before interest, taxes, depreciation and amortization grew 6.8 percent on the year-earlier period, to 123.5 million euros, or $160.3 million, “driven by the more favorable product and area mix of sales.”
The group’s directly operated stores network — which accounts for 56.7 percent of revenues — generated “excellent results” in the six-month period, the company said, with sales up 20.5 percent, to 273.4 million euros, or $354.8 million. Given the strong growth in this channel, the group is pushing its development: At the end of June, Tod’s had 182 DOS and 71 franchised stores, compared with 161 DOS and 70 franchised stores a year ago.
Shoes represented the lion’s share of the group’s sales, totaling 360.6 million euros, or $468.0, an 11 percent increase on the year-earlier period. Leather goods and accessories also performed well, gaining 14.3 percent, to 83.1 million euros, or $107.8 million, while apparel sales dropped 6.5 percent on the year-ago period to 38.3 million euros, or $49.7 million.
Geographically, all of the firm’s markets — bar Italy — posted double-digit growth, with strong performances in North America (up 30 percent) and in Asia and the rest of the world (which increased 55.6 percent), underpinned by “outstanding results in Greater China, where the group confirms its extraordinary growth rates,” Tod’s said. In the rest of Europe, excluding Italy, sales jumped 10.6 percent, driven by strong demand in the U.K. and France.
In the group’s home country — its largest, representing some 42 percent of sales — belt-tightening by consumers squeezed by government austerity measures, a recessionary economy and a “rationalization of Italian wholesale distribution” led to the 12 percent drop in revenues, to 199 million euros, or $258.2 million.
Tod’s said its investments in the first half totaled 26.2 million euros, or $34 million, compared with 37.7 million euros, or $48.9 million, a year ago, including about 20 million euros related to the Colosseum restoration project in Rome and other investments to widen and refurbish the company’s distribution network.
Tod’s shares closed up 10.3 percent in Milan, at 84.75 euros in an overall flat market.
During a conference call with analysts following the results, chief financial officer Emilio Macellari said analyst consensus figures of a 6.5 percent increase in full-year sales growth were “fair and reasonable.”
Macellari also said he felt comfortable with analyst consensus estimates of an end-year Ebitda margin of 26.1 percent, up from the just-ended first half’s 25.6 percent. Noting that the group would have to “recover 50 basis points in the second half of the year,” the cfo said these would be found partially from lower advertising and promotions expenses, with the rest coming from the gross margin, which is expected to improve thanks to a “more favorable mix by product and geography and channel” as well as from a minor incidence on full-year basis of labor costs and rent.