ECCO GROWS BY 18.9% IN FOOTWEAR, MARGINS ARE UP SHARPLY
ECCO doubled its net profit in 2006, while its shoe deliveries reached historic levels, growing by 14.5 percent to 14.8 million pairs, not including another 1 million pairs from a license in Japan. All of ECCO’s product categories for footwear – men’s, women’s, kids, golf and performance – contributed positively to the growth, and revenues from shoes were up by 18.9 percent to €4,148.2 million Danish kroner (€556.4m-$751.1m).
But only 700,000 pairs of shoes were produced at ECCO’s factory in Portugal in 2006, as compared to 2.3 million in 2005. Conversely, 1.9 million pairs were made at its factory in Indonesia, compared with 0.8 million made there in 2005, and 4.8 million pairs came from its facility in Thailand, where it produced 3.9 million the year before. The group’s factory in China nearly doubled its output to 867,642 pairs as compared to 475,724 in 2005. The factory in Slovakia made 3.2 million pairs, up from 2.8 million in 2005.
The group’s total revenues, which include footwear as well as leather and accessories, rose by 16.7 percent to DKK 4,470 million (€599.5m-$809.3m). Operating profit jumped by 79 percent to DKK 759 million (€101.8m-$137.4m). ECCO’s profit before taxes climbed by 103 percent to DKK 709 million (€95.1m-$128.4m). Net profit grew by 117 percent to DKK 489 million (€65.6m-$88.5m). The equity/debt ratio increased to 47.4 percent, as compared to 39.1 percent in 2005.
The operating margin, which reached 17 percent in 2006, is likely to be lower this year, partly because of the anti-dumping duties on leather footwear imported from China. On the the other hand ECCO expects revenues to grow by another 10 percent or more in 2007, with one-quarter of the group’s sales being generated in the Americas. However an unfavorable exchange rate between the kroner and the dollar will be a negative factor. Preliminary orders for this year’s Spring and Fall collections suggest sales growth across all of ECCO’s sales regions and product lines in 2007.
ECCO will continue searching for strong retail partners and ideal locations for its franchised stores. At the end of 2006, the company had 551 shops, compared with 457 at the end of 2005. Of the total, 98 were company-owned stores, as compared to 97 in 2005. The group also had 1,018 shop-in-shops at the end of last year - about 250 more than at the end of 2005.
The total revenues generated by the group in the Western Europe region, which includes the Benelux countries, the UK and Southern Europe, increased by 7 percent last year, reflecting higher prices for more advanced styles and a 3 percent increase in volume. They represented 17 percent of the group’s total turnover. In the Central Europe region, which represents more than 30 percent of ECCO’s net revenues and covers German-speaking countries and Scandinavia , sales were up by 7 percent in volume and by 8 percent in kroner, thanks to improved distribution and more marketing activity, as well as a general expansion of the product range.
Turnover again grew fastest in Eastern Europe, climbing by 43 percent in value and by 40 percent in volume, taking up a 19 percent share in the total revenues. Revenues in the Americas rose by 19 percent in volume and by 21 percent in value, and were boosted by new activities at department stores and improved management of sales activities. Sales in the region constituted 23 percent of ECCO’s total. Turnover in the Asia/Pacific region jumped by 23 percent in volume, but in spite of a jump of 56 percent in value it still represented only 5 percent of the company’s business.
Like in 2005, accessories again represented just 1 percent of total revenues, but sales of this product category nonetheless climbed by 33 percent. Men’s shoes accounted for 30 percent of group sales, women’s footwear for 40 percent, kid’s shoes for 15 percent and golf/performance footwear for 18 percent. Sales by category rose by 5 percent for women’s, by 11 percent for men’s, by 31 percent for children’s and by 18 percent for performance/golf.