MILAN — Tod’s Group SpA on Wednesday reported higher operating profits and revenues in the first nine months of the year, helped mostly by favorable currencies.
In the nine months ended Sept. 30, group revenues reached 786.9 million euros, or $881.3 million, a 6.2 percent increase on the year-earlier period. At constant currencies, the result would have been essentially flat.
In the third quarter, sales increased 3.1 percent on the year-earlier period, to 271.6 million euros, or $301.48 million.
In a statement released after the close of trading in Milan, where Tod’s is listed, group chief executive officer Diego Della Valle said the third-quarter results were positive especially in light of the “weakness of some important markets for luxury goods.” Della Valle said the group was satisfied with the results being generated by stores and with the positive feedback on the new collections. “We are, therefore, confident that the quality of our management, the effectiveness of our strategy and the financial resources necessary to develop our projects will bring increasingly better results,” he said.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the January-to-September period came in at 160.1 million euros, or $179.31 million, up 2.4 percent on the year-earlier period, while EBIT came in slightly lower, at 122.5 million euros, or $137.20 million, due to slightly higher amortization expenses related to the group’s retail expansion and store refurbishment program, together with investments at headquarters — including upgrading manufacturing facilities — the firm’s chief financial officer, Emilio Macellari, said on a conference call.
Higher labor costs also weighed on the bottom line, with the total headcount reaching 4,530 at the end of September, compared to 4,305 in the year-earlier period.
The currency impact on profitability was clear: At constant exchange rates, EBITDA would have been 144.6 million euros, or $161.95 million, and EBIT 109.4 million euros, or $122.53 million, the company said. The company doesn’t report net profit for the nine-month period.
Dollar amounts have been converted at average exchange rates for the periods to which they refer.
In terms of group brands, flagship Tod’s reported revenues of 453.1 million euros, or $507.47 million, in the January-to-September period, up 5.1 percent, sustained by currency tailwinds; at constant currencies the brand would have seen a 1.5 percent sales drop over the period.
During the conference call, Macellari said that of the new products introduced for fall, the bags designed by Alessandra Facchinetti, the brand’s creative director of women’s collections, “are performing much better than previous families of products.” He said the new Wave bag was the “bestseller of the season, a style of bag that is very successful and performing very well across all markets across the world.”
He said that the group’s strategy of repositioning itself as a lifestyle brand is starting to bear fruit and if successful it should boost the brand’s underperforming accessories and leather-goods businesses, where sales were flat (plus 0.3 percent) at current exchange and negative (down 5.9 percent) at constant currencies.
Of the group’s other brands, the best performer remained Roger Vivier, where sales jumped 20.1 percent in the period (up 8.9 percent at constant currencies), to 112.1 million euros, or $125.6 million. Macellari remained mum on talks about the Roger Vivier license renewal: “We started our conversation…the conversations are open and still going on. We didn’t yet achieve a definitive result,” he said.
Hogan — the group’s second most-important brand in terms of sales volumes — reported a 3.1 percent increase in revenues (up 1.8 percent at constant currencies), at 176.8 million euros, or $198.02 million, while Fay sales still came in lower (down 1.1 percent, or down 1.2 percent at constant currencies) with respect to the previous comparable period. Roger Vivier and Hogan were the only two group brands to register positive results in all markets, including Greater China, where depressed consumer spending has been a drag on other luxury brands.
In terms of product categories, shoes continue to remain the group’s driving force, with revenues up 8.1 percent (or 2.1 percent at constant currencies) in the first nine months of 2015, at 621.3 million euros, or $695.86 million.
All geographic markets — except Greater China — showed revenue growth in the nine-month period, at both constant and current exchange rates, with the Americas (which includes North and South America), putting in the best performance, at current exchange rates (up 19 percent, or 3.0 percent at constant currencies).
During the call, Macellari said that in the U.S., wholesale performance over the period was “really positive,” while retail was slightly less strong as tourist numbers were lower. But he said the U.S. market is “one of those territories where we do have a higher level of focus and into this market we are trying to increase our presence through directly operated stores and a higher presence in department store doors.”
Macellari was bullish on the group’s prospects. Asked by analysts to provide some guidance, he said he was “happy” with the full-year analyst consensus of top-line growth of 6.2 percent and a 19.7 percent EBITDA margin on sales. “We think these two targets can be achieved…I think it is not completely challenging unless something completely unforeseeable happens between now and year-end,” he said.
During the call, some analysts pointed to the negative same-stores sales growth performance over the nine-month period, which were down 6.1 percent in locations open at least one year, asking if there was improvement since the end of the third quarter. Macellari said that in the month of October and the first week of November performance was “better than in the third quarter or the first nine months of 2015.” But, he added, while the recent trend was turning positive, “Of course, we cannot consider three, four or five weeks as a sign of complete recovery. There are similar trends among regions, improvement visible in all territories: Those who were already positive are slightly more positive than before while those who were negative are less negative than before.”
Meanwhile, the group is continuing with its distribution expansion strategy, remaining on track with its store opening program of about 25 net, new locations each year, Macellari said. He added that due to some “good opportunities,” the company has moved forward to the end of this year some store openings originally planned for the beginning of 2016.