The Tod's "No Code Shelter" project at Milan Design Week.

MILAN Tod’s SpA on Thursday reported a drop in first-quarter revenue and cast doubt on its ability to reach full-year analyst consensus targets for top-line growth and profitability.

During a conference call after results were published, chief financial officer Emilio Macellari said meeting full-year analyst consensus estimates would be “a bit challenging” in part due to increasing operating expenses the company will incur as it invests more resources in marketing and retail in order to “increase the visibility and desirability” of its products. In March, the company had said meeting a consensus of 3 percent top-line growth in 2019 was “reasonable and not particularly challenging.”

However, during the conference call Macellari said that, regarding consensus targets, much depends on how well the company performs in the second half, adding that “the initiatives we are implementing for the second half of the year can make the difference.”

Among initiatives the company hopes will help drive sales, chief executive officer Umberto Macchi di Cellere pointed to the capsule collection by designer Alber Elbaz for Tod’s, which will be in stores this summer. Macchi di Cellere said the No Code project was also “doing very well and is generating additional sales.” He added that, while he didn’t want to be “too optimistic,” he felt that “these kind of additional contributions can generate more interesting results going forward.”

In the three months ended March, Tod’s SpA reported revenues of 216.4 million euros, down 4.3 percent on the year-earlier period. At constant exchange rates, revenues would have been down 5.7 percent.

In its results statement, published after the close of trading in Milan, the company said the drop is “entirely due to the wholesale channel, while the results in the retail channel are visibly positive.” Part of this was due to the acquisition of e-commerce platform Italiantouch, Macellari explained, as revenues on the platform — previously accounted as wholesale revenues — since the last quarter of 2018 have been accounted as retail sales. In terms of the platform’s performance, he singled out China as “the market that is growing fastest,” in part due to the low volumes it was starting from but also due to “the attitude of Chinese customers to buy online, including luxury goods.”

All of the group’s brands — except for Roger Vivier, where sales increased 16.2 percent at current exchange, to 43.9 million euros — suffered sales declines in the first quarter, with flagship brand Tod’s reporting an 11 percent slide, to 106.4 million euros. Again, the company said the performance was “entirely due” to the weakness of the wholesale channel.

The company reported single-digit declining sales in all product categories — again, mainly due to poor performance in wholesale — and in all geographic markets, bar “Greater China,” where sales inched up 3.1 percent on the year earlier. The company singled out mainland China, which represents some 60 percent of sales in the region, as well as Hong Kong and Macau for their “positive results.”

While wholesale revenues in the period suffered, the company said retail revenues, including directly operated stores and online sales, were up 9.2 percent in the quarter. But same-store sales growth was up only 2 percent. Compared to one year ago, the company said it had added seven directly operated stores to its network, bringing the total to 283. The number of franchised stores remained stable at 118.

The company said it had “encouraging feedback from the new projects for the spring collections” and — asked by an analyst for some figures — Macellari remarked: “I can tell you that the trend we are seeing in April and May is not substantially different from the trend that we reported in the very first part of year. The beginning of the second quarter is not far from first quarter, in terms of like-for-like.”

Separately, in its statement, the company also reported that its board had on Thursday approved the plan for incorporation into Tod’s SpA of the wholly owned subsidiary Holpaf BV, which owns the Omotesando building in Tokyo that hosts Tod’s Japanese flagship and the group’s regional offices. This step is part of the sale process of the building itself, which the company announced on March 11, when it released full-year 2018 results. At the time, Tod’s said it expected to get 156 million euros from the sale, which would “result in a gross gain of around 100 million euros” once the transaction is completed. In its Thursday statement, the company said on March 7 the building was the subject of a “preliminary sales agreement to be executed between Aug. 31 and Oct. 31, 2019.”

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