Continued strong sales increases in July and August and very good acceptance of its Fall/Winter 2004/05 collections have led the management of the Tod’s group to raise its guidance for the full year. Sales growth, which was previously projected at about 6 percent in terms of euros for all of 2004, and at a higher rate in local currencies, should end up in the high single digits or the low double digits. The operating profit is expected to improve, too, but it’s no longer sure whether there will be a substantial increase in margins.

Diego Della Valle is confident that the group’s profitability will improve in the longer term, both in the company’s factory and in its stores. Both have benefited from strong investments in the recent past and the controlling shareholder expects to reap the fruits now. He is looking for additional growth in the near future from the development of the Asian market, the expansion of the high-margin leathergoods division and the planned launch in the second half of 2005 of a profitable new footwear project which is for the moment top secret.

As previously reported, the group’s sales in the 1st half of this year grew by 12.1 percent to €194.5 million, in spite of the strong euro. Footwear sales increased by 11.4 percent in euros and by 13.4 percent in local currencies. The growth rate accelerated to 33.8 percent in the 2nd quarter, but that was mainly due to later deliveries of the summer collections. Most recently, the strongest growth rates were experienced in Asia, the USA, Italy and the UK, while the French and German markets remained soft.

Tod’s now reports an increase of only 9.3 percent in the group’s operating income before amortization (Ebitda), which reached €36.7 million during the 6-month period, leading to a reduced margin of 18.5 percent due to the cost of development the store network. Staff costs increased to 17.3 percent of revenues from 16.9 percent in the same period a year ago, while rental costs grew from 6.6 to 7.8 percent of sales. Expenses on advertising and promotion were kept at 8.7 percent of sales but are budgeted to increase to 9 percent of sales for the full year.

After a 16 percent rise in amortization charges, related the recent heavy round of investments, the operating profit (Ebit) showed a 10.7 percent decline to €15.89 million, but it would still have risen by 2 percent to €18.1 million if exchange rates had remained the same. The pre-tax profit fell by 17.2 percent to €16.4 million. Because of higher taxes imposed by the Italian government, net earnings were off by 26.2 percent to €8,002,000.