MILAN — Tod’s SpA’s first-half profits dropped 26.2 percent — partly due to an accounting change from a new Italian fiscal law — while sales grew at a double-digit pace on the strength of its Asian business as well as an expanding retail store base.

For the first six months of the fiscal year, the luxury leather goods maker reported net income of 8 million euros, or $9.8 million, versus 10.8 million euros, or $11.9 million, a year ago.

Sales, however, grew 12 percent to 196.8 million euros, or $241.5 million, from 175.7 million euros, or $194.1 million, last year. Euros have been converted to dollars at average exchange rates for the corresponding periods.

Tod’s said the sales increase was driven by strong performance in the leather goods and footwear divisions, a hefty growth in the Asian market and the group’s expanded network of directly operated stores.

By brand, the Tod’s nameplate grew 15.5 percent at constant exchange rates, the company said, and continues to be the group’s cash cow, accounting for 59.5 percent of sales. The Hogan brand grew 15.2 percent, accounting for 25.8 percent of the group’s sales. Sales at Fay, however, dropped 1.1 percent and accounted for 12.2 percent of total revenues.

Revenues through directly operated stores grew 30.9 percent at constant rates, triggered by the opening of 14 additional stores since the end of the year-ago period and a positive like-for-like growth trend.

Management said the company is “starting to reap the benefits of major investments made over the last several years in development of the distribution network, the hiring of qualified personnel and expansion of production facilities.” The company also said “in light of the ongoing economic recovery, we are confident that this growth trend will continue and strengthen in the near future.” In turn, the firm confirmed “forecasts of higher income and profits for the entire fiscal year.”

— Luisa Zargani

This story first appeared in the September 14, 2004 issue of WWD. Subscribe Today.