The Tod's and Roger Vivier brands continued to enjoy strong growth in the first quarter, underpinning the results of the Tod's group. Instead, the Hogan and Fay brands posted lower sales due to a selective distribution policy.
Overall, the group booked an 8.0 percent increase in quarterly revenues to €243.7 million. At constant currency rates, sales were up by 7.1 percent. The top line of the first three months is largely generated by sales to wholesale and franchisees for the spring/summer collection.
The group said that it did not experience any order cancellations by clients but that it has been cautious, refusing “easy sales” and canceling orders to clients experiencing payment difficulties. For these reasons, the group's order backlog for the fall/winter collection is unchanged compared with the previous year.
By brand, revenues increased by 13.4 percent to €121.2 million for Tod's. On a currency-neutral basis, Tod's rose by 11.5 percent. Hogan was down by 2.4 percent to €91.8 million, Fay fell by 4.0 percent to €23.9 million and Roger Vivier surged by 98.1 percent to €6.6 million. The group said that despite the decline in revenues for Hogan, the label is achieving positive results outside Italy, especially in Asia. Meanwhile, Fay is performing well in European markets and Roger Vivier is supported by growth in Italy and abroad.
Revenues rose in all major categories, except apparel. Footwear sales were up by 8.3 percent to €195.9 million, leathergoods and accessories rose by 15.3 percent to €39.9 million, and apparel sales slipped by 3.0 percent to €27.2 million. Revenues from other products doubled to €0.2 million.
In Italy sales fell by 4.0 percent to €134.9 million as the group maintained tight control over its distribution policy. The country still represented 51.3 percent of Tod's sales but is expected to account for less than half the group's revenues in the full year.
Italy has the lowest mark-up among the group's main markets. In Italy the mark-up is 2.3-2.4 times. This compares with 2.4-2.5 times for continental Europe. In the U.K. and the U.S., the mark-up reaches 2.6-2.7. However, unlike in Europe, American retail prices do not include the value-added tax so the mark-up is effectively much higher because sales taxes are added to the retail price. In Asia, the mark-up varies from 3.0 to 4.0 times. Despite import duties, higher transportation costs and often higher rents, Asian markets are the most profitable for the group.
Sales were up by 5.0 percent to €52.4 million in other European countries, driven by the U.K., France and Germany. Revenues increased by 21.2 percent to €14.8 million in North America and surged by 48.7 percent to €61.1 million in Asia and the rest of the world, led by China, Hong Kong and Macao as well as strong growth in Japan. Combined sales in China, Hong Kong and Macao represent nearly 13 percent of the group's sales. The group has 47 company-run stores in Greater China.
At constant currency rates, revenues rose by 18.8 percent in North America and by 45.4 percent in Asia and the rest of the world.
By channel, revenues generated by sales to third parties and franchisees were up by 1.0 percent to €149.9 million and sales generated by directly operated stores (DOS) rose by 18.9 percent to €113.3 million. In the 19 weeks running from Jan. 1 to May, same-store sales grew by 7.8 percent at company-run stores, an improvement compared with the 7.1 percent rise registered in the 11 weeks from Jan. 1 to March 11. The acceleration in sales was stronger in China, Hong Kong and the U.S. The U.K. enjoyed the strongest organic sales growth in Europe, followed by France and Germany.
In a conference call, Tod's chief financial officer, Emilio Macellari, said that China and Hong Kong continue to perform in line with the previous year and the group has not witnessed any slowdown in sales at its own stores.
At the end of the year, the group had 179 DOS and 68 franchisees compared with 158 DOS and 68 franchisees a year earlier.
The group's Ebitda margin slipped to 25.3 percent in the first quarter from 26.7 percent a year earlier and the Ebit margin narrowed to 21.8 percent from 22.9 percent due to higher costs. The group booked higher advertising and promotion (A&P) costs, which are expected to be recovered in the coming months. The expansion of the DOS network increased in the impact of rents, which represented 7.2 percent of revenues compared with 6.0 percent a year earlier. Labor expenses rose to 13.3 percent of sales from 12.8 percent as the number of employees rose to 3,643 from 3,297. The group also increased investments to €14.7 million from €11.7 million. Tod's plans €50-60 million in capital expenditures in 2012, of which one-third will go toward store openings. The group opened five stores in the first quarter and plans about 15 more during the rest of the year.
Macellari said that excluding the increase in A&P costs and a €1 million donation to the charity Save the Children, the Ebitda margin would have been 27.5-27.6 percent of sales.
At the end of March, the group had a net cash pile of €110.3 million.
The company believes it can meet market expectations, which according to the consensus of analysts' forecasts, indicate a 6.6 percent increase in full-year revenues and an Ebitda margin of 26.1 percent.
Tod's added that it will continue its policy of raising prices in line with inflation, which means that average prices should go up by 2-3 percent compared with the previous year.