Tod’s H1 profit drops more than expected as sales slow

Italian luxury accessories brand Tod’s suffered a tough H1 reporting late Thursday a larger-than-expected fall in core profits as lower revenue reflected weakness in The Americas, in its restructuring domestic market, and notably in China. However, Tod’s remained upbeat saying it is banking on a near-term turnaround: “We are very confident on the second half of the year,” CEO Diego Della Valle said, citing positive feedback on a winter collection featuring a wider product assortment.

Ebitda in the January-June period fell 20% to €103m ($138m), noticeably short of the €115m analysts had expected. Net profit fell 26% to €56.2m.

Revenue period dipped 2.7% to €477.7m, hurt by cooling demand in China where sales were down almost 8%.

US sales also suffered as Tod’s renovated its flagship store on Madison Avenue in New York, set to reopen at the end of August, and relocated a boutique in Honolulu.

The group, however, saw the sharpest sales decline in its domestic market, which accounts for nearly one-third of the total sales, down 8.7%.

Business in Italy has recently seen its wholesale distribution network streamlined in a bid to make the brand more exclusive.

Although Italy slid back into recession in Q2, Tod’s CFO Emilio Macellari said the worst was behind, and that smaller tourist flows had also taken a toll.

Sales in the rest of Europe were brighter, posting a 7% increase.

Gains made by Tod’s high-end footwear brand Roger Vivier failed to offset losses at the Hogan brand, which is highly exposed to the Italian market. Clothing sales, meanwhile, fell 5%.

Macellari said an improvement in coming months should allow Tod’s to roughly halve a same-store sales drop of 8.3% for the first 31 weeks of 2014.

Tod’s, meanwhile, is trying to broaden its product offer with analysts saying a narrow, predicable offer is to blame for a sharper fall in sales and profit than other luxury peers.

Macellari said Tod’s craved to increase its exposure to leather goods and accessories: “Bags and accessories is where we want to be,” he said, adding however, that slowing momentum in the sector did not help Tod’s transition.

Tod’s opened 29 new directly-owned stores in year to end-June

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