Tod’s Sees Signs of Recovery in China After Challenging H1, Working on 2021

MILAN — The Tod’s Group is eyeing 2021, relying on a loyal customer base and the fundamentals of its brands, focusing on the development of its digital tools to overcome the effects of the COVID-19 pandemic.

On Tuesday, the Italian luxury group reported a net loss of 80.6 million euros in the first six months of the year, compared with a loss of 5.7 million euros in the same period last year.

Revenues fell 43.5 percent to 256.9 million euros, compared with 454.6 million euros in the first half of 2019, impacted by the lockdown enforced practically worldwide. In the second quarter, sales totaled 104.1 million euros, down 56.3 percent compared with the same period last year.

Chairman and chief executive officer Diego Della Valle addressed a world that “has completely and drastically changed” in the wake of the pandemic, after a positive start to the year, noting that the second quarter was worse than the first, given the closure of almost all of the group’s stores for most of the period.

“We have adopted a policy of strong prudence and have decided to limit product deliveries on both sales channels, to reduce the risk of unsold stock,” said Della Valle. “We have focused even more on the e-commerce channel, which is growing very well, is giving us excellent results and which allows us to reach also many new customers.”

The entrepreneur said that over the past few weeks, the group is “registering encouraging signs of recovery, particularly in China, where we are recording double-digit growth rates, while Europe and the Americas remain weak, heavily penalized by the lack of tourists. The results of the current year will therefore be certainly affected by the pandemic, even if it is still too early to quantify the impact, given the low visibility on the evolution of the situation. We are already working on 2021, implementing our medium-term strategic plan, maintaining a strict policy of attention to costs and efficiency, which is giving us good results.”

Della Valle expressed his confidence in the group’s “features and tools necessary to overcome this exceptional crisis and return to growth, thanks above all to the great respect that our loyal customers have for our brands and for the excellent quality of the products and thanks to the solid financial structure, which we are used to having. We are now highly focused on the development of digital communication, which will allow us to attract a world of new consumers, which we have not yet reached; together with a strong creative innovation, they will bring us the growth we expect, as soon as the markets will normalize.”

In the first half of the year, adjusted earnings before interest, taxes, depreciation and amortization, which exclude an extraordinary inventory write-down of 30 million euros, amounted to 12.3 million euros, down 84.7 percent compared with 80.4 million euros in the same period of 2019, hit by the higher incidence on sales of operating costs, despite a prudent review of unnecessary costs, said chief financial officer Emilio Macellari in a conference call with analysts.

The company reported an adjusted operating loss of 64.1 million euros, compared to an operating profit of 5.8 million euros in the first half of 2019.

The worst moment of the pandemic happened in the second quarter as, for the entire month of April and the first half of May, 53 percent of the group’s stores were closed, Macellari observed.

The restart of activities was gradual, and of different intensity, in the various areas of the world. The most reactive market was Mainland China, where revenues recorded double-digit growth in the second quarter, progressively accelerating and showing “a very positive trend,” with increased local spending in China, said chief executive officer Umberto Macchi di Cellere on the call. On the contrary, Hong Kong and Macao remained much weaker. There were good results also in Korea, which controlled the pandemic, and Japan. Europe and the U.S., the latter also troubled by social tensions and structural problems, Macchi di Cellere said, were still very weak, due to the absence of tourists.

“All in all, we are definitely seeing improvements compared with the first half,” he said.

Sales of the Tod’s brand fell 46.1 percent to 124.5 million euros. Roger Vivier revenues were down 39.2 percent to 61.4 million euros. Sales of Hogan decreased 41.9 percent to 58.4 million euros and those of Fay by 42.2 percent to 12.4 million euros.

By category, sales of shoes fell 42.4 percent to 211.8 million euros, and those of leather goods and accessories dropped 51.8 percent to 30 million euros. Revenues derived from apparel amounted to 14.9 percent, down 38.1 percent.

By geographic market, Italy was down 47.6 percent to 65.6 million euros. Sales in Europe totaled 61.2 million euros, down 46.9 percent. Revenues in the Americas were down 52.8 percent to 16.1 million euros. Sales in Greater China totaled 74.3 million euros, down 33.4 percent, and sales in the Rest of the World fell 42 percent to 39.7 million euros.

Retail sales totaled 185.1 million euros, down 42 percent and sales to third parties amounted to 71.8 million euros, down 47 percent.

“We have done our best to speak to and consolidate our relations with our partners, agreeing on some controlled reductions, without ever pushing them more than their potential,” said Macchi di Cellere.

Macellari echoed this, adding that the group had granted delayed payments as a “sign of proximity and fair cooperation.”

As of June 30, the group’s distribution network included 292 directly operated stores and 112 franchised units, compared to 288 DOS and 114 franchised stores at the end of June last year.

In the first half of 2020, the group invested 14.9 million euros in tangible and intangible fixed assets, compared to 22.4 million euros in the first half of 2019, mainly channeled into its store network, such as the new Tod’s flagship in Tokyo’s Ginza.

As required by the accounting standard IFRS 16, as of June 30, the group accounted for lease liabilities of 422.5 million euros, compared to 416.9 million euros at the end of June last year. Net of these liabilities, the net financial debt amounted to 157.9 million euros which compared to net debt of 92.4 million euros at the end of June last year.

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