China, Digital Help Tod’s as Group Reports Drop in 9M Sales

MILAN — Double-digit growth in China in the third quarter and very strong gains in the group’s e-commerce channel stirred Diego Della Valle, chairman and chief executive officer of the Tod’s Group to say he was “convinced that, after these moments [hurt by the pandemic],” the company “will be able to perform very well, thanks to the strength of its brands, the excellent quality of its products, the skills of its management teams and the solidity of its capital structure.”

Despite the improvements, year-to-date figures in the first nine months of 2020 continued to show steep declines, hurt by the consequences of the coronavirus pandemic. Revenues fell 33.2 percent to 452.6 million euros, compared with 677.7 million euros in the same period of 2019. The figures were also impacted by slightly negative currency fluctuations. Sales in the third quarter decreased 12.3 percent to 195.7 million euros.

Della Valle pointed to a positive trend continuing throughout October. “Our winter collections are receiving an excellent feedback from local customers all over the world; obviously in the Western world the results of the stores are negatively affected by the absence of the tourists and, in recent weeks, they have been further impacted by the new closures imposed to contain the second wave of the pandemic,” continued the entrepreneur, touting an excellent performance of e-commerce, “which recorded a progressive acceleration and grew at solid double figures in the entire nine-month period. This is a priority channel for us, in which we are continuing to invest heavily; we are expanding the customer base, also thanks to new digital forms of communication.”

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The company, said Della Valle, during the third quarter started testing omnichannel distribution model in Europe.

“In this context of unprecedented crisis, with very limited visibility into the future, we are managing all activities already looking to 2021, following the indications of our strategic path, with a strong attention to cost control, great prudence in the collection of wholesale orders, with particular emphasis on the digital world and trying to remain flexible and reactive, to face the continuous evolution of the international markets,” he said.

In addition to prioritizing the health of the group’s employees, the board on Wednesday approved a new welfare plan to provide workers and their families the opportunity to benefit from a series of services including the strengthening of their social security and health coverage.

Customers also remain a priority for the group, concluded Della Valle, and to strengthen that relationship, Tod’s is turning its attention to communicating, especially through digital tools, with its existing customers and working to “increasingly capture the attention of new consumers, who are the engine of the disruptive growth of our sector. To succeed in this aim, we are hiring new talented people, coming from the sector, and we are following a precise and coherent strategy that I hope will bring us the desired results in a short period of time.”

In the nine months, sales in the retail channel decreased 34.8 percent to 304.2 million euros. The wholesale channel showed a 29.7 percent drop in revenues to 148.4 million euros.

As of Sept. 30, the group’s distribution network comprised 296 directly operated stores and 109 franchised units. Although at the end of September 89 percent of the shops were open regularly, the situation is evolving quickly, with new restrictions enforced by local governments as the spread of the infection worsens.

Chief executive officer Umberto Macchi di Cellere said during a conference call with analysts on Wednesday after the end of trading, that “the world was divided into two main regions,” with Asia offering very positive signs and Mainland China, where revenues recorded solid double-digit growth, progressively accelerating lifted by the Chinese returning to buying. He cautioned however, that he could not say yet that Chinese spending is helping to recover lost sales in the first half. “But the trend is comforting.” To a lesser extent, he said, Korea and Japan are also recovering.

“Europe and the U.S. are still very weak, heavily penalized by the absence of tourists and by our policy of prudence with the wholesale channel, which has high importance in these markets.” In addition, he said, the mood of local customers is far from prone to shopping.

In the nine months, sales in Italy decreased 36.6 percent to 123.9 million euros, while Europe was down 34.7 percent to 115.1 million euros. Revenues in the Americas fell 48.2 percent to 25.9 million euros. Macchi di Cellere said that renegotiating leases with landlords in the region was “actively ongoing.”

Sales in Greater China dropped 20.2 percent to 124.8 million euros, while the Rest of the World area was down 36.9 percent to 62.9 million euros.

By brand, Tod’s sales decreased 38.6 percent to 211.3 million euros; Hogan reported a 27.4 percent drop in revenues to 109.1 million euros; sales of Roger Vivier fell 26 percent to 106.6 million euros, and Fay was down 34.2 percent to 25.3 million euros.

Shoes, the group’s core category, reported a 31.7 percent decline in sales to 371.1 million euros. Macchi di Cellere said that the company is “seeing signs of increased interest in moccasins and shoes rather than sneakers” and that newer models designed by Tod’s creative director Walter Chiapponi, whose first collection bowed for fall 2020, were receiving “very positive feedback and selling well.”

Leather goods and accessories were down 43.4 percent to 51.8 million euros, while apparel fell 30.5 percent to 29.4 million euros.

Chief financial officer Emilio Macellari underscored that all cost control activities are continuing, while measures to protect and develop sales are in place and that production activities are currently as normal. He said the group’s stance continues to be prudent, avoiding any excessive stock, as the environment has worsened since September and is “very challenging around the world,” while noting the positive news from China.

Asked to comment on whether the group would join new Instagram or Facebook stores or participate in Amazon’s new luxury platform, Macchi di Cellere said it “still prefers a wait-and-see” approach, “depending on the brands that will come. We want to be present where it’s appropriate.”

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