Tod's disappointed investors again, with its first-quarter top line missing market expectations by about €3 million, and the group failing to fulfill its pledge of relaunching sales, a task that was due to be achieved in the second half of 2018.

In the first quarter, group sales dropped by 4.3 percent to €216.4 million. At constant currency rates, the decline reached 5.7 percent. The decrease largely stemmed from the wholesale channel.

A British investment brokerage firm, Bryan Garnier, noted that Tod's under-performed its peers in Greater China. It cut its forecast for the company's operating margin (Ebit) to 6.8 percent for the full year. The financial analysts' consensus was that the group would book a pre-tax profit of €90 million on sales of €967 million in 2019, indicating an improvement from pre-tax earnings of €65.8 million on sales €940.4 million in 2018. Without giving figures for its profitability in the quarter, Tod's admitted that market expectations were challenging in terms of sales and margins for the year.

In the comments accompanying the results, Diego Della Valle, chairman, co-chief executive and main shareholder of Tod's, defended its strategy, which calls for an accelerated investment program, particularly in marketing and digitalization. At the company's recent annual general meeting, Tod's revealed that its online sales were growing by nearly 20 percent, representing 7 percent of total revenues.

By channel, revenues generated by sales to wholesale clients and franchisees fell by 21.7 percent to €77.6 million, and they decreased by 22.0 percent at constant-currency rates. The segment was affected by the conversion into directly-operating stores (DOS) of franchised stores in Australia and the acquisition last year from the Della Valle family of Italiantouch, which has been offering online products from the group's four brands: Tod's, Hogan, Roger Vivier and Fay.

Revenues generated by DOS and e-commerce rose by 9.2 percent to €138.8 million, and grew by 7.0 on a currency-neutral basis. Same-store sales improved by more than two percentage points but fell by 2.5 percent in local currencies during the quarter, and the trend was similar in April and May. Financial analysts were expecting a reading of minus 1.5 percent in the opening quarter.

The group had 283 DOS at the end of March, nine more than a year earlier. The number of franchised stores remained steady overall at 118 units.

Looking at the different brands of the group, the only bright spot was the strong performance of the Roger Vivier brand, whose latest collections, created by the new designer Gherardo Felloni, obtained “an excellent acceptance worldwide,” according to the group. Roger Vivier rose by 16.2 percent to €43.9 million during the period, rising by 13.7 percent in local currencies.

Sales were down by 11.0 percent to €106.4 million for the Tod's brand, with currency-neutral revenues declining by 12.7 percent. The fall was “entirely” accountable to the wholesale channel while results in the retail channel were “visibly positive,” according to the group.

The Hogan brand fell 3.1 percent to €54.0 million, also due the wholesale channel. Conversely, the brand's retail sales went up, especially in China, while Italy showed signs of recovery. Same-currency sales were down by 3.5 percent.

The Fay brand's revenues decreased by 6.4 percent at actual and constant exchange rates to €12.0 million, mainly due to the weakness of the Italian market, led by the wholesale channel.

By product category, footwear sales declined by 3.8 percent across all brands in the first quarter to €175.3 million. Leathergoods and other accessories fell by 6.9 percent to €27.6 million and apparel decreased by 4.9 percent to €13.4 million. In local currencies, revenues were down by 5.0 percent for footwear and by 9.7 percent for leathergoods and accessories.

The management blamed the sales decline in the quarter mainly on the weakness of the Italian market, which represents 30 percent of the group's sales. In Italy, the group's overall revenues decreased by 9.4 percent to €63.6 million, while sales in the rest of Europe fell by 4.8 percent to €54.8 million, with constant-currency revenues down by 4.9 percent.

The group's sales performance was not brilliant in various parts of the world. In the Americas, revenues fell by 1.9 percent to €15.1 million, but the decline widened to 6.3 percent in local currencies. Sales in Greater China went up by 3.1 percent to €50.2 million, but the increase dwindled to 0.8 percent on a currency-neutral basis. The turnover in the rest of the world fell by 4.6 percent to €32.7 million, dropping by 8.3 percent in local currencies.