MILAN — The coronavirus pandemic did not spare Tod’s SpA, which on Wednesday reported revenues plummeted by almost 30 percent in the first quarter.
In the three months ended March 31, revenues totaled 152.8 million euros, down 29.4 percent compared with the same quarter last year.
Diego Della Valle, chairman and chief executive officer of the group, which comprises the Tod’s, Roger Vivier, Hogan and Fay brands, touted a strong start to the year, with growth in all markets. But this was halted by the COVID-19 outbreak and “forced us to review everything, giving priority to many new problems, often unknown, that we had to manage suddenly,” he said.
After underscoring the protection and safety of employees and their families, Della Valle cited a “prudent” attitude at the company, given the uncertainties triggered by the pandemic, “trying to limit our inventories, to avoid generating unsold stock due to lack of demand, and the related consequences. We have also tried to prepare our stores to give them an image of freshness and refinement and make them attractive when reopened.”
The prudence will continue into the second half of 2020, “with great attention to the evolution of the markets, to be ready and responsive to the first positive signs. We are paying great attention to strategies of cost cutting and increasing efficiency, that will give us good results,” he said.
“I take also the opportunity to thank all our managers, who are doing a huge and excellent job in optimizing everything. Considering that nothing will be the same as before, we are preparing a brand new design, marketing and communication plan that takes into account the people’s habit of using the web more and more, which in the future will be increasingly protagonist in spreading products, stories and all that which will be used to communicate and will also help our e-commerce division, which is growing very solidly,” Della Valle continued.
He remarked on the development of e-commerce and the increase in sales of the company’s stores, “the two pillars, that will allow the group to obtain the necessary growth in a relatively short time and on this we will focus our greatest efforts. We will continue, more and more emphatically, to support the philosophy of our brands, that enhance the great quality, exclusivity and uniqueness, values that are becoming increasingly relevant in this period.”
In sync with previous initiatives, Della Valle pointed to additional solidarity projects, and concluded with a “hope in the coming months to have greater visibility to be able to operate more effectively and to have realistic targets, wishing that we can start again, albeit gradually, to see a clearer future.”
Chief financial officer Emilio Macellari during a call with analysts also spoke about prudence, pointing to a cut of 30 percent in capital expenditure, whose “impact will be significant but too early to quantify. We don’t know how and when we will return to the new normality. We are thinking of the second half and 2021, avoiding excessive product in stores, strengthening our image and the values of craftsmanship.”
Asked about visibility on earnings, Macellari said he was not allowed to disclose them and, “even if we were allowed, they would not be significant in a quarter like this one, which is not a regular situation.”
Due to a real lack of visibility, he said it was not possible to make forecasts for the first half, although he did add it will be “significantly negative, as revenues are expected to be down even more than in the first quarter,” noting that in the second quarter, in Italy, Europe and the U.S., stores were closed for “two thirds of the period. There is no chance that the second quarter can be better than the first. With a more optimistic view, provided the situation can be recovering progressively and gradually, if we assume the [improving] trend in China can be applicable to Italy, the U.S. and Europe, we can have a good enough second half, not a disaster, not a double-digit decrease in sales, but positive economic results.”
In the quarter, sales of the Tod’s brand decreased 31.7 percent to 72.7 million euros. Hogan was down 26.4 percent to 39.8 million euros, and Roger Vivier revenues dropped 30.4 percent to 30.5 million euros. Fay totaled 9.7 million euros, down 19 percent.
By category, shoes were down 29.5 percent to 123.6 million euros. Leather goods and accessories totaled 17.9 million euros, a 35.1 percent decrease, and apparel totaled 11.2 million euros, down 16.8 percent.
Hurt by the progressive lockdown in each market around the world, all regions suffered. Italy was down 26.8 percent to 46.6 million euros, while Europe totaled 43.3 million euros, a 21 percent decrease.
Sales in the Americas totaled 11.7 million euros, dropping 22.2 percent.
Greater China was down 47.2 percent to 26.5 million euros. Chief executive officer Umberto Macchi di Cellere said the company had “seen a beginning of a restart in China like most brands, it’s definitely showing a positive trend,” but he was also cautious, reporting “less traffic than sales, people go to buy and not browse.” He said China remains “a high priority” for the group, a region that Tod’s wants “to maximize and focus investments on.”
Sales in the rest of the world were down 24.4 percent to 24.7 million euros. Macellari said that, in average and worldwide, tourists accounted for one-third of the group’s sales last year.
By channel, retail decreased 33.3 percent to 92.5 million euros, while sales to third parties were down 22.3 percent to 60.3 million euros. Macchi di Cellere said the group is “very close” to its wholesale partners, which often have been working with the company for a long time. “We want to support them, we have accepted since the crisis that a remaining part of the orders remain in the pipeline so as not to ship the entire quantity for spring 2020. We want to ensure they reopen, work and pay us, and not put them in excessive difficulty. Case by case, we are discussing with them how to overcome the period.”
Macellari said the inventory “will not have a traumatic impact, we interrupted production and when we did, we were still producing the queue of spring.” Factories cautiously reopened 10 days ago with a partial number of people and the plan is to increase that gradually. Both the ceo and the cfo underscored during the call that Tod’s can leverage evergreen styles that can be carried over with small changes and do not become obsolete.
Responding to questions about discounting and pricing, Macellari said the company plans to “adopt a bit more aggressive strategy in discounting, for example, we could go from discounts by 20 to 30 percent or from 30 to 35 percent because all competitors will be aggressive.” Macchi di Cellere also pointed to “a very solid network of outlets.”
While reports have circulated about some brands hiking prices, as of today, said Macchi di Cellere, the group “is not planning any major changes. We won’t touch our prices, they were defined for all and communicated and we don’t think now is the time for people to absorb the changes.”
There are also no plans to change the group’s strategy in terms of drops, but Macchi di Cellere said Tod’s is focusing more on the newly appointed creative director Walter Chiapponi. “It’s a pity that his first collection bowed before the lockdown [in February in Milan], but we are pleased with the extremely positive feedback it has received. There are no major changes in our marketing plans, either.”
Macellari concluded by saying that the group has supported all its employees in every country, granting the same salaries also to those that were not working. “In the U.S. or where others fired or furloughed, when stores are closed, we continue to pay salaries globally. It may not be wise in economics but solidarity, assistance are principles, to support those that have been with us for the good and bad moments.”