Tod’s is forecasting a slowdown to a high single-digit growth in sales for this year after a 14.7 percent increase in 2007, but expects to slightly improve its EBITDA margin after it fell to 23.3 percent of sales last year.

The news generated more disappointment about the company’s performance, especially regarding the profitable leathergoods segment, which underperformed in 2007, and prompted some financial analysts to cut their estimates.

The influential Italian investment bank Mediobanca trimmed its 2008 forecast for Tod’s revenues to €712.8 million, 0.6 percent lower than its previous expectations; cut the EBITDA estimate by 1.6 percent to €167.3 million; and reduced net profit expectations by 4.6 percent to €88.7 million. The EBITDA margin is forecast at 23.5 percent of salescompared with the 23.3 percent ratio reported by Tod’s in 2007.

The Italian luxury goods company closed 2007 with a 14.7 percent increase in sales to €657.1 million, broadly confirming preliminary data released in January. At constant currency rates, sales rose by 16.9 percent to €669.8 million.

Full-year earnings before interest, taxes, depreciation and amortization (EBITDA) rose by 11.3 percent to €153 million. At constant exchange rates, EBITDA would have reached €158.9 million and a margin of 23.7 percent, close to the 24.0 percent ratio reached in 2007. The company failed to achieve its target of improving the EBITDA margin by 1.0-1.5 percentage points due to adverse currency variations and an increase in the cost for services, which represented 32.6 percent of sales compared with 31.5 percent in 2006, mainly due to an increase in production expenses.

Tod’s increased promotion and advertising expenses to 8.9 percent of sales against 8.8 percent in 2006, while rents represented 5.9 percent of sales compared with 5.7 percent. Personnel costs were trimmed to 13.6 percent of sales from 14.0 percent in 2006 despite an increase in the headcount to 2,472 from 2,280.

Operating profit before interest and tax (EBIT) increased by 11.2 percent to €126.5 million. At stable rates, the figure reached €131.9 million. Net earnings jumped 17.0 percent to €77.3 million, lifted by a drop of more than 3.0 percentage points in the tax rate to 37.8 percent thanks to a tax reform in Italy. The company expects the tax rate to further decline to 35 percent in 2008.

The final sales figures reported along with the profit results were largely the same as those announced earlier this year (see Shoe Intelligence #2-3 of Feb. 4). By brand, Tod’s sales rose by 6.5 percent to €347.6 million, but at constant currency rates, the increase was about 10.0 percent. Hogan’s sales increased by 28.3 percent to €199.5 million, Fay rose by 9.2 percent to €90.0 million, Roger Vivier jumped by 146.0 percent to €16.0 million, while other revenues rose by 78.6 percent to €4.0 million.

By product, shoe sales rose by 19.5 percent to €427.2 million, while leathergoods and accessories, which carry lower margins, rose by only 4.2 percent to €139.2 million. At constant currency rates, footwear sales rose by 21.3 percent and leathergoods and accessories rose by 8.7 percent.

Sales in directly-operated stores rose by 12.3 percent to €318.1 million, while sales by franchisees and independent retailers rose by 17.0 percent to €339.0 million. At similar currency rates, DOS sales rose by 15.6 percent and third-party sales rose by 18.1 percent. As of Dec. 31, 2007, Tod’s had 125 DOS and 63 franchisees compared with 110 DOS and 63 franchisees a year earlier.

Same-store sales rose by 12.4 percent in 2007, but slowed down in the first 13 weeks of 2008 to a growth of 5.6 percent. However, the company indicated that same-store sales started picking up again with the introduction of the Spring/Summer collection. Tod’s also booked double-digit growth in orders for the Fall/Winter collection.

Despite posting higher-than-expected results, Tod’s surprised financial analysts by keeping its full-year dividend unchanged at €1.25 per share. The consensus was for a dividend of around €1.45 and the move is viewed as a measure to maintain a solid balance sheet in a worsening business environment.

Tod’s finished the year with a decline of its net cash pile to €73.5 million from €90.6 million at the end of 2006 because of a rise in investments to expand its retail network and the upgrade of its information technology system, besides higher net working capital. Investments rose to €45.2 million from €30.5 million and the net working capital to €208.5 million from €164.5 million.

Investments are scheduled to reach €35-37 million this year as the group continues expanding its retail footprint. Tod’s already expanded the store network to 129 directly owned units and 62 franchises in the first quarter. On Jan. 1, the group bought three franchises in Shanghai and Beijing.