Tod’s Reports Return to Profitability and Revenue Gains in First Half
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MILAN — The Tod’s Group returned to profitability and saw a 17.4 percent gain in revenues in the first half of the year, registering figures higher than in 2019 despite a slowdown in Greater China. The Italian luxury group is eyeing an expansion in the Americas, which posted a 49 percent growth in sales in the six months ended June 30, and reported that tourists flocked back to its stores.
“We are satisfied with these results, which confirm the appreciation for the outstanding positioning of our brands and the high quality of our products,” said chairman and chief executive officer Diego Della Valle. “Meanwhile, we carefully look at the performance of international markets, currently difficult and full of unknowns, both from an economic and geopolitical point of view. We therefore pay the utmost attention to the evolution of costs related to energy, logistics and raw materials. We also consider as priorities the rationalization and efficiency of the distribution network and the development of omnichannel, with the aim of increasing like-for-like and higher-margin turnover.”
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The Della Valle family in August said it was planning to delist the group from the Italian Stock Exchange after 22 years, and questions about the future were expected during a call with analysts at the end of trading on Wednesday. Indeed, while Della Valle was not on the call, as is customary, chief financial officer Emilio Macellari admitted it was “a tricky question,” deflecting it to the owners, who are launching a tender offer to acquire 25.55 percent of the company’s shares. The Tod’s Group controls the Tod’s, Roger Vivier, Hogan and Fay brand.
However, Macellari responded by saying that his understanding was “that the intention is to make some reorganization, a generation of efficiencies and more structural strategies to generate positive effects in the mid, long term. In the short term, this could determine some negative impact on results, and by delisting, there would be no pressure from the market demanding short-term positive results. But this is only my comment, I don’t know exactly the intention of the offer.”
That said, his remarks were similar to those made in August by the Della Valles, who are eyeing an acceleration of the brands in the long term.
Brothers Diego and Andrea Della Valle control 63.64 percent of Tod’s shares. Delphine S.A.S. under the LVMH Moët Hennessy Louis Vuitton Group will remain an investor in Tod’s capital with its current 10 percent stake.
DeVa Finance, entirely held by DI.VI. Finanziaria di Diego Della Valle & Co., will be launching the tender offer, which could reach a 90 percent stake for a total of more than 338 million euros.
In a separate development, the group said Wednesday that Chiara Ferragni can no longer be qualified as independent director board member. She is not a member of any committee of the board but remains a member of the board. This is due to “a cashed and occasional income for advertising services made in favor” of the company, and “since further future opportunities of collaboration can’t be excluded.”
While the company did not elaborate, Ferragni, as reported in May, fronted the Tod’s Generations campaign with her mother Marina Di Guardo and sisters Valentina, who designs a jewelry line, and Francesca, photographed by Sean Thomas in a villa and its gardens on Lake Como, posing in Gommino loafers and carrying the Bow bag.
The news of Ferragni’s arrival, seen as contributing to the group’s rejuvenation, in April 2021 had caused the shares to spike on the Italian Bourse.
In the six months ended June 30, net profit amounted to 800,000 euros, which compares with a loss of 20.7 million euros in the first half last year.
Sales totaled 467.5 million euros, up 17.4 percent from the first half last year.
The impact of currencies was positive, in particular for the Tod’s and Roger Vivier brands, which have the greatest presence abroad; at constant exchange rates, sales rose 14.3 percent.
A more favorable mix of revenues by region, distribution channel and product category in addition to the lower incidence of promotional sales contributed to a growth in profitability.
In the six months ended June 30, earnings before interest, taxes, depreciation and amortization amounted to 90.6 million euros, with an incidence on revenues of 19.4 percent, more than 300 basis points higher than the 16.3 percent in the same period last year.
Operating profit totaled 17.7 million euros, compared to the operating loss of 2.7 million euros in the first half last year.
The Tod’s brand grew 24 percent to 233.5 million euros and Roger Vivier sales were up 5 percent to 118.7 million euros. Hogan revenues climbed 18 percent to 95 million euros and Fay sales rose 17 percent to 19.6 million euros.
By category, sales of shoes rose 13 percent to 369.3 million euros.
Asked about the proportion of sneakers, Macellari said the group does not disclose this figure, but said it did not contribute to the bulk of sales, although “it’s a very interesting and visible double digit” percentage.
Sales of leather goods and accessories climbed 44 percent to 71.8 million euros. Apparel was up 22 percent to 25.7 million euros.
By geography, sales in Italy rose 23 percent to 109.5 million euros and revenues in Europe climbed 37 percent to 102.3 million euros.
Sales in the Americas were up 49 percent to 38 million euros and Macellari said the U.S. market is “under-penetrated.” The group is seeing “good resilience of demand and reporting a very good performance,” although he pointed out that it’s “not a big business, but there are very good signals and good expectations. We are paying great attention to the U.S., where there is good spending power. We consider it an elective market for Tod’s and Roger Vivier.”
Hogan is present in that market only online and Fay is not available there. “We are working on brand awareness, we consider there is great room for expansion, it’s still a strong and rewarding market,” Macellari continued.
Sales in Greater China were down 13 percent to 135.7 million euros, impacted by the restrictions to curb the pandemic. “In China, in the first half, 88 percent of stores were opened, but the ones that were closed were the biggest and the ones that had the most impact,” Macellari explained. “Despite a very good beginning of the year, the performance was negative, even if it was positive versus 2019. From June, the area restarted to grow proportionally, but it did not recover the same kind of performance.”
He said the impact of the lockdown was “particularly significant” on online sales, as the “complete closure of the warehouse and logistics in Shanghai made it impossible to deliver” merchandise. In fact, e-commerce grew single digit in the first half, and “not the very strong double digit seen in the past 10 to 15 quarters,” Macellari observed.
Hong Kong and Macau were weak, while Japan and South Korea showed a good performance, he said.
Sales in the rest of the world were up 54 percent to 82 million euros.
Asked about current trading, Macellari said in the first two months of the third quarter, Italy “still showed a positive trend growth due to the return of tourists, Americans in particular and intra-Europeans. The rest of Europe is improving fast.”
In China, there is a “progressive reopening” since early June, “improving but not yet recovered, and we see volatility week by week. APAC is weak due to the scarcity of traffic, Hong Kong in particular, but slightly improving, Singapore is positive. Japan and [South] Korea continue to grow but at a slightly lower rate than the average of the first half.”
Tod’s increased its prices in the first half in Western markets to reduce the gap with Asia, but Macellari did not elaborate on the percentage.
In the first half, the retail channel was up 19 percent to 348.6 million euros. As of June 30, the group’s distribution network comprised 318 directly operated stores and 85 franchised stores, compared to 304 DOS and 96 franchised stores at the end of June last year.
Third party sales grew 12 percent to 118.9 million euros.
In the period, the group invested 17 million euros in tangible and intangible fixed assets, slightly lower than the 19 million euros last year and mainly channeled into the expansion and update of its directly operated stores and in digital.
As per the IFRS 16 accounting standard, as of June 30, the group accounted for lease liabilities of 489.4 million euros, compared to 425.8 million euros at the end of June last year. Net of these liabilities, the net financial debt was 85 million euros, which compares to a net debt of 136.6 million euros at the end of June last year, confirming a strong cash generation during the last 12 months.
Macellari said he “presumed” the company would still be listed on Nov. 10, when the group is expected to report results for the first nine months of the year.
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