Tod’s Reports Loss, but Beats Expectations

James Fallon and Sofia Celeste
·3 min read

Tod’s SpA reported a net loss of 73.2 million euros last year, compared with a net profit of 46.3 million euros posted in 2019, as the COVID-19 pandemic and lockdowns took their toll on key markets like Italy and the U.S.

But the results were better than expected as analysts had forecast a loss of 106 million euros, according to a consensus figure published on the company’s website.

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During a conference call on Wednesday, the Italian leather goods company’s management noted that it is confident in the “extremely positive” performance of its e-commerce business and China sales, as well as the momentum of the Roger Vivier brand, at the start of 2021.

“The most positive drivers are the Far East and China in general and e-commerce, while the weakest remain Italy, Europe and the U.S.,” chief financial officer Emilio Macellari noted.

In the fourth quarter, sales were down 22.6 percent to 184.5 million euros, compared with the same period in the previous year. This figure was offset by sales in China, which continued to grow in double digits, while the Western world, after a modest improvement in October, suffered a further slowdown due to further lockdowns imposed by local governments to deal with the flare-up of infections.

In the 12 months ended Dec. 31, the Italian luxury group that comprises the Tod’s, Roger Vivier, Hogan and Fay brands reported a 30.4 percent decrease in sales to 637.1 million euros, compared with 916 million euros in 2019.

Macellari explained that the pandemic situation is “difficult” but said Tod’s is on track to meet “achievable” 2021 consensus expectations of 740 million euros in sales and an earnings before interest and taxes loss of 35 million euros. In 2020, Tod’s posted a negative adjusted EBIT of 93.7 million euros, compared to a positive result of 3.6 million euros in 2019. EBIT has been adjusted to exclude the 30 million euro extraordinary inventory write-down, made due to the impact of the COVID-19 pandemic, and the impairment of 11.7 million euros related to the Fay brand.

In order to strengthen its capital structure, Tod’s revealed in January that it had signed a credit agreement with a pool of banks, coordinated by Intesa Sanpaolo SpA with IMI Corporate and Investment Banking Division, for a maximum total of 500 million euros. The sustainability-linked loan has a five-year maturity and is structured in a term facility of 250 million euros and a revolving credit facility of an additional 250 million euros.

As of Dec. 31, the group’s distribution network comprised 300 directly operated stores and 103 franchised units, compared to 290 DOS and 115 franchised stores at the end of December 2019. Macellari added that, while the company’s physical expansion remains cautious in light of the pandemic, Tod’s should end 2021 with a “high-single-digit” number of net openings.

The company’s board has decided not to distribute a dividend on 2020 earnings.

Looking ahead, Tod’s Group chairman and chief executive officer Diego Della Valle said the company will prioritize facets like its digital marketing strategy and its e-commerce channel, which continues to grow at a “high-rate.”

“We have increased our investments in marketing, in all its forms, mainly digital, which we deem as a crucial communication tool to dialogue with the new generations of consumers, which we consider a priority to fuel the future growth of our turnover,” Della Valle said.

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