Tod’s Profits, Sales Slip in Q1

A strong performance in China and the Americas couldn’t offset a drop in revenues in Italy.

MILAN — A strong performance in China and the Americas couldn’t offset a drop in revenues in Italy, driving profits and sales at Tod’s SpA down in the first quarter ended March 31.

This story first appeared in the May 15, 2013 issue of WWD.  Subscribe Today.

The luxury goods company said Tuesday that operating profits in the three-month period fell 6.8 percent to 53.4 million euros, or $70.5 million, and earnings before interest, taxes, depreciation and amortization were down 4.6 percent to 63.6 million euros, or $84 million.

The group does not release net profit figures on a quarterly basis.

Revenues of 253.5 million euros, or $334.6 million, represented a 3.7 percent decrease compared with 263.2 million euros, or $344.8 million, in the same period last year.

Dollar amounts have been converted at average exchange rates for the periods to which they refer.

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“First-quarter results are in line with our expectations and are a direct consequence of the strategy we decided to adopt, given the current environment,” said chairman and chief executive officer Diego Della Valle, citing “strong prudence in Italy” compared with an international expansion with a focus on the Americas and China. Della Valle touted a coherent growth of the brands, “without damaging their prestige and integrity.” He concluded: “Given the good results of our stores and the orders backlog, I am confident that our group could reach a growth in sales and profit also in the current year.”

The company said that first-quarter sales were “significantly influenced” by the group’s strategic decision to rationalize wholesale distribution, mainly in Italy, in light of “its challenging situation. The primary goal of this decision, which was started last year, was to maintain the quality of the credit portfolio, but also to preserve the brands’ exclusivity and positioning.” This mainly affected the Hogan and Fay brands, more present in Italy and at wholesale.

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In the first quarter, sales of the Tod’s brand were up 3 percent to 141.6 million euros, or $187 million.

Hogan sales were down 21 percent to 70.8 million euros, or $93.4 million. Fay was down 35.2 percent to 14.9 million euros, or $19.6 million. Roger Vivier sales more than doubled to 26 million euros, or $34.3 million, compared with 12.9 million euros, or $16.9 million, in the same period last year.

In terms of categories, sales of footwear, the group’s core business, was up 1.2 percent to 198.2 million euros, or $261.6 million. Leather goods and accessories revenues decreased 5.5 percent to 37.7 million euros, or $49.7 million, a drop the company attributed to the impact of the rationalization implemented in the wholesale channel. Sales of apparel were down 36.4 percent to 17.3 million euros, or $22.8 million, reflecting the performance of the Fay brand.

Sales in Italy dropped 26.7 percent to 98.9 million euros, or $130 million. Europe also suffered, showing a 3.8 percent decrease to 50.4 million euros, or $66.5 million.

In the Americas, sales were up 31 percent to 19.4 million euros, or $25.6 million.

The company touted “outstanding growth” in Greater China, which was up 55.4 percent to 57.2 million euros, or $75.5 million, accounting for 22.5 percent of total sales in the quarter.

In the Rest of the World area, sales were up 13.5 percent to 27.6 million euros, or $36.4 million.

In the first quarter, the group invested a total of 9.4 million euros, or $12.4 million, in tangible and intangible fixed assets, compared with 14.7 million euros, or $19.2 million, in the same period last year, mainly aimed at the expansion and refurbishment of the retail network and the update of industrial and production structures, as well as the development of the company’s software.