Tod's RTW Spring 2020

MILAN — Diego Della Valle stands by the strategy he has set to turn around his company, believing in medium-term goals and accelerating the investments to support its growth.

Commenting on Tod’s SpA revenues in the first nine months of 2019 — which decreased 4 percent to 677 million euros, compared with 706 million euros in the same period last year — the chairman and chief executive officer said “the results of the quarter are substantially in line with our expectations. We continue to remain focused on the execution of our medium-term strategic plan.”

Della Valle pointed to “the right management team” and the arrival of Walter Chiapponi, who joined the Tod’s brand last month as reported, as factors that will contribute to the growth of the group. “We are confident that his skills as a talented Italian designer will allow him to combine the Italian lifestyle of Tod’s with modernity and irony, without ever losing sight of the great quality and good taste that are in the brand’s DNA,” the ceo said.

The entrepreneur underscored the “highly competitive context,” and said that “considering our medium-term goals, we believe it is important to accelerate the investments necessary to support our top-line growth. Assuming no further turbulence from the markets, we believe that we will soon be able to obtain the expected results.”

By brand, in the nine months ended Sept. 30, Tod’s sales were down 8.5 percent to 344.3 million euros, while Hogan reported a 5 percent decrease to 150.3 million euros, despite double-digit growth in Greater China and notwithstanding the political tensions affecting Hong Kong.

Revenues of Roger Vivier climbed 13 percent to 144 million euros, lifted by all regions except the U.S. During a conference call with analysts on Wednesday evening at the end of trading in Milan, where the group is listed, Vivier ceo Umberto Macchi expressed satisfaction with the performance and the profitability of the brand, citing a “very positive” reaction to some of the new sneakers designed by creative director Gherardo Felloni, who succeeded Bruno Frisoni last year. The group is eyeing further expansion for the label in Asia, despite a selective distribution network, and in particular in Greater China and Korea.

Fay sales dropped 11.6 percent to 38.5 million euros, mainly due to the weakness of the Italian market, especially in the wholesale channel, which is predominant for the brand.

By category, sales of shoes, the group’s core business, decreased 3.4 percent to 543.2 million euros, but the company said it has seen an improvement in the third quarter of the year, lifted by good reception of the new product families of all the brands.

Leather goods and accessories were down 4.8 percent to 91.5 million euros, while sales of apparel fell 9.9 percent to 42.4 million euros, broadly reflecting the performance of the Fay brand.

Sales in Italy fell 10.2 percent to 195.3 million euros, hurt by the weakness of the wholesale channel.

In the rest of Europe, group revenues decreased 4.4 percent to 176.3 million euros, while sales were down 6.1 percent in the Americas, totaling 49.9 million euros.

On an upbeat note, sales in Greater China rose 2.6 percent to 156.4 million euros. The acceleration of growth in Mainland China, which represents more than 60 percent of this region, more than offset the sharp slowdown recorded in the Hong Kong market.

Finally, in the area “Rest of the World” sales rose 1.2 percent to 99.8 million euros. The strong acceleration of the third quarter is largely linked to Japan, where the entire luxury sector benefited from an anticipation of purchases in September, before the value-added tax increase occurred at the beginning of October, said chief financial officer Emilio Macellari. Japan accounts for 5 percent of total sales, he noted.

Retail sales rose 7 percent to 466.5 million euros, representing almost 70 percent of total revenues. In the third quarter, this channel grew 8 percent, driven by double-digit growth in e-commerce. This was included in the retail channel starting from Oct. 1 last year, following the acquisition of Italiantouch. E-commerce accounts for between 7 and 8 percent of sales. Of that, 50 percent derives from Italiantouch and the rest from third parties, said Macellari. “Online is growing at a very strong double-digit pace, and the signs are already visible.”

The executive said Tod’s is increasingly becoming a retail company and Macchi noted that “no major expansion of flagships” is in the pipeline, given the “quality and presence” around the world of the existing stores.

Like-for-like sales were down 4.7 percent. Macellari said that this performance was “not particularly different from the first half of the year,” when he “did not have much better expectations,” but that the focus is to improve like-for-like sales. “A better performance of our existing stores is the real signal we are waiting for,” he said.

As of Sept. 30, the group counted 290 directly operated stores and 111 franchised stores, compared to 279 DOS and 118 franchised stores at the end of September last year.

Regarding the arrival of Chiapponi, Macchi hailed it as a “big change as the company was not used to having a single designer on top of all collections. He is very active, but the first signs [of his designs] will be seen in the spring of next year. We are confident that we have someone in place that will give a creative push and a modern twist to the brand while respecting its DNA.”

Asked about the Tod’s Factory project of capsules and collaborations, Macchi said that will continue in the mid- to long term. “We did not launch them as we waited for a creative director. They can be parallel and strong, with a major designer or maybe not.”

Both Macchi and Macellari enthused about the Tod’s Factory Alber Elbaz collaboration, which helped the group in terms of visibility and marketing.

The collection, said Macellari, was “much more important in terms of giving a signal of a younger, more ironic and joyful collection.” However, a real contribution was not expected in the third quarter, because the collection was in stores at the end of September or early October, and was not reflected in the nine months numbers, said the executive.

Macellari reiterated the group does not give weekly or monthly updates but, responding to an analyst, he said that there were no significant changes in the month of October. “Hong Kong did not recover at all, the performance is in line since the beginning of the third quarter and much worse than the first six months.” He also underscored the “particularly tough” competition in the group’s sector.

Once again, he urged analysts to be patient, when growth will “probably” be seen in the second half of next year. “We don’t intend to wait forever; we feel the direction is the right one and we want to see the results.”

The Della Valle family owns more than 64 percent of capital and by the end of November will have acquired an additional 7 percent. Tod’s shares, which on Wednesday closed at 41.78 euros, have dropped 22.7 percent in one year. Pointing to a small percentage of free floating shares, Macellari said he believed it was “difficult” for the Della Valles to be looking at buying more shares, waving away a delisting option.

Macellari said the consensus of 909 million euros in 2019 sales was “not difficult to meet.” As for the EBITDA margin of 6.4 percent, it’s “feasible, maybe a bit challenging,” given an acceleration in operating expenses to support the brands.


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