MILAN — “Give us time.”
This was one of the messages Tod’s Group chief financial officer Emilio Macellari delivered in commenting on the luxury company’s performance in the first nine months of the year. “We are investing in the new products that can generate a contribution and visibility, showing that the brand is active, not static, while keeping our quality and Made in Italy excellence, but give us time,” Macellari said during a call with analysts on Wednesday after the group reported a 2.2. percent decrease in revenues in the period to Sept. 30.
In the nine months, sales totaled 706 million euros, compared with 722.2 million euros in the same period last year. At constant exchange rates, they were flat, up 0.1 percent.
“Today’s results were broadly in line with our expectations,” stated Diego Della Valle, chairman and chief executive officer of the group. “We are in the process of delivering to our stores the projects launched a few months ago. In these days, the initial effects of the new business model that will support our future growth [Tod’s Factory] are starting to be visible and, from now on, new products will arrive in stores every two months, supported by strong and proper marketing and communication plans,” said the entrepreneur of the new strategy that will see drops throughout the year.
“The new store formats are ready and the related opening plan is on track. These are innovative and right concepts for the ‘new consumer,’ who asks for an omnichannel service. Consistently, our e-commerce is growing a lot, and it will be able to grow even more, at full speed,” explained Della Valle. “Our management team is almost complete, and I believe that it has already the required skill set to achieve our goals. We have to face a period of hard work, paying attention to the continuous evolution of world markets, which will never reflect the same conditions we were used to operate in in the past.”
Della Valle said he believes there are now “important opportunities to grab and we want to devote all the needed energy and financial resources to achieve a solid and lasting growth for our group.”
Currency fluctuations affected the performance of the Tod’s and Roger Vivier brands, which have the highest presence abroad.
In the nine months, sales of the Tod’s brand were down 3.1 percent to 376.3 million euros. Macellari said the brand recorded a healthy start of the fall season, across all product categories, with the arrival of new projects in stores, such as the No-Code project. “The No-Code is the first one in sell-outs since it hit stores, it’s particularly strong, and it’s a clear evidence we understood the direction the market wants us to take,” said Macellari, who was cautious about predicting results.
“We wait and see the results. I am confident results will come, but I cannot assure you they will come in two or five weeks,” he said, pressed by analysts. “We are in the right direction, but we need more time. And we understand it can take more time than expected although the first signs are surely positive. I prefer to promise less and deliver more.”
Responding to one analyst who contended that Macellari did not sound positive about the changes, the executive on the contrary said he did not doubt the success. “We are doing all that is logical and possible to achieve and defend our position,” he said, urging to focus on the long-term and not the single quarter or even year. “We need time to collect results.” He also pointed to the new capsule with Alessandro Dell’Acqua, which is “generating interest in the brand and additional sales.”
Macellari echoed Della Valle’s remarks on increased competition. “Nowadays, when all of the main fashion groups have focused their attention on the product categories that traditionally represent our core business, to obtain excellent results our products must be special, innovative and supported by a strong marketing and communication campaign, which can provide us with strong global visibility,” Della Valle said. “This is why I have instructed my managers to invest as much as is needed to support our growth goals as quickly as possible.”
Macellari said the company is investing in product, samples, design, research, promotion activities, marketing and communication to support the new course of the company. Investments are in the range of 9 percent of sales.
Asked about Della Valle’s recent denial of reports he was considering a sale of the company, following a restructuring of his holdings, Macellari said the business titan “thinks the company is undervalued, the share price does not reflect the value of the company. It’s logical, for someone who has very high confidence in what can be achieved to see the share price at not the ideal level. It’s most probable that the family can decide to increase [the stake] in the company, not divest.”
In the period, Hogan revenues inched up 0.9 percent to 159.3 million euros and showed solid double-digit growth in Europe and China.
Sales of Roger Vivier decreased 3 percent to 127.4 million euros, slowed by the weakness of some markets during the summer months, but showing significant signs of improvement in recent weeks. The company expressed confidence about the end of the year, pointing to the “excellent acceptance” of the products by new designer Gherardo Felloni, which are now arriving in the stores.
Macellari admitted Vivier suffered a bit in the third quarter but said there was absolutely no worry, “it’s not a trend.” The brand’s reputation has not changed at all, and the company is turning down offers to open stores and to sell to more wholesale accounts to keep the exclusivity of the label. “The demand of the product is much higher than we want to meet. Once you announce a new designer, there is a physiological drop of sales at the end of the previous designs. There is curiosity for a new product. The acceptance of Felloni’s designs is good, the attention is high, and there is no issue,” Macellari said. While saying he had “nothing against” former creative director Bruno Frisoni, he said clients were asking for newness.
The Fay brand was down 2.8 percent to 43.5 million euros, reflecting the weakness of the domestic market, mainly in the wholesale channel.
By category, shoes were down 2 percent to 562.2 million euros. At constant exchange, sales were up 0.3 percent. The apparent slowdown in the third quarter was almost entirely due to the different timing of the deliveries of the wholesale channel, said the company.
Sales of leather goods and accessories totaled 96.1 million euros, down 3.7 percent, but the fall collection registered a healthy start.
Revenues of apparel were down 1.8 percent to 47.1 million euros, broadly reflecting Fay’s performance.
In the first nine months of 2018, domestic sales were 217.5 million euros, a 4.4 percent decrease, showing a persistent weakness.nIn the rest of Europe, revenues totaled 184.4 million euros, inching up 0.8 percent. In the Americas, sales amounted to 53.1 million euros, down 7.8 percent. At constant exchange, they were down 1 percent.
Revenues in Greater China decreased 1.7 percent to 152.5 million euros, but were up 3 percent at constant exchange. The company reported positive results in mainland China, which represented about 60 percent of this region, in Hong Kong and in Macau. Macellari said mainland China was positive even if there was a slowdown in the third quarter, partially due to a lack of assortment in stores but that can be recovered now that new products are arriving. “We remain positive that by the end of the year it will be better than in the nine months,” he said.
Finally, in the Rest of the World area, sales inched down 0.5 percent to 98.5 million euros.
Sales through directly operated stores decreased 3 percent to 436 million euros. Like-for-like sales were down 2.1 percent. Macellari was cautious about the 2018 consensus. He defined the improvement in like-for-like “pale” and if the trend continued in the last quarter, it could impact year-end figures. The month of October was in line with the first nine months, he said.