In a year when many companies saw sales and earnings plunge precipitously, pre-tax results for Ecco in 2008 fell by just 1.3 percent to 745 million Danish kroner (€100.0m-$135.2m). The company said it started cutting costs as soon as the financial crisis began, as far back as February 2008, and so managed to achieve significant savings. Net sales for the year went up by 3.0 percent, reaching a new record of DKK 5,374.1 million (€721.6m-$975m).
For the current financial year, Ecco’s management expects significantly lower numbers, but says it will keep an eye out for the kinds of opportunities that generally present themselves in difficult times.
Out of the total revenues generated in 2008, 94 percent came from shoes, which saw growth of 3.4 percent. Sales by volume increased by 4.1 percent to 17.6 million pairs, while the average sales price stayed flat. Sales of accessories went up by 22.9 percent, while those of leather and wetblue dropped by 7.3 percent.
The operating margin in 2008 was down by 0.6 percentage points to a still relatively high level of 15.4 percent. The profit for the year after tax and minority interests was DKK 527.4 million (€70.8m-$95.7m), compared with DKK 537.6 million the year before.
Cash flow from operating activities was positively affected by a decline in the group’s stock of DKK 103 million and amounted to DKK 789 million (€105.9m-$143.1m), up sharply from DKK 264 million in 2007. The company reported a solvency ratio of 56 percent, up by 7 percentage points from 2007, supporting Ecco’s general goal of financial independence and making it strong enough to overcome the present economic crisis.
A total of 135 new Ecco stores were opened during the year. The company is strongly developing in Russia, where it opened its 200th Ecco store last year in St. Petersburg. Since 2006, the number of stores in Russia has more than doubled. Globally, Ecco had 136 corporate stores and 686 partner stores at the end of last year, for a total of 822 doors. Its goal is to have 1,500 shops by 2013.
In 2008, the company opened 13 new stores and 44 new shop-in-shops in the Americas. Sales were down by 13 percent in this region, however, mainly due to the early crisis in the U.S.. In Asia-Pacific, where Ecco’s sales grew by 24 percent, there were 88 company-owned stores at the end of 2008, up from 75 the year before. China continues to dominate Ecco’s penetration strategy, with 387 stores including franchises in 2008 compared with 292 in 2007.
A new joint venture between Ecco and its long-time Japanese licensee, Achilles Corporation, was implemented in December in Japan, with the goal of opening more stores and making the brand stronger.
In the Europe Central region, the net number of stores increased by 43 for a total of 185. Revenues grew by 3 percent. In the region that comprises Eastern Europe and the Middle East, there were 375 stores for 2008, up from 311. The only major market to experience recession was the Ukraine.
Sales fell by 6 percent in Western Europe, where the number of Ecco stores increased by six to a total of 84. The company opened its fifth store in London, and its first Italian one in Bolzano. Ecco has expanded its organization in this more mature region, setting up a full retail department, whose target is to support franchise partners.
With its new Premium Store and Flagship Store concepts, Ecco has completed its portfolio of store formats, adding to its Signature Store and regular shops. It now has Premium Stores in Berlin, Hong Kong, Copenhagen and Dubai. So far there is only one Signature Store, in Hong Kong, which can be described as a study in interior design. Ecco has worked on the service package it provides to the stores to support repeat sales. It has honed its «never out of stock» concept with 48-hour replenishment and close follow-up of the sale in the markets.
Ecco owns its own shoe factories and tanneries, and its factories produce 80 percent of its footwear. Its tannery in Thailand won last the gold award for the highest possible environmental and safety assessment by Satra, the British technology center. Ecco’s tannery in Indonesia uses the oil and wax produced in the finishing processes to replace diesel fuel for its energy requirements.
In January 2009, Ecco announced that it was going to restructure its production unit in Portugal, focusing it only on product development. The workforce there will be reduced by 177 employees. The cost of the reorganization is expected to be about DKK 40 million (€5.37m-$7.26m).
For the spring of 2009, Ecco is presenting its new Premium Collection, a high-end line jointly styled by Niki Tæstesen, the company’s lead designer for women’s shoes, and by Ecco’s chief executive, Dieter Kasprzak. The shoes, made of exotic leathers, will be available only in Ecco’s Premium Stores.