Tod’s Posts Robust Growth, but It’s Not Immune to Luxury’s Slowdown

LONDON — Tod’s Group posted double-digit growth in the first nine months, and is bullish about its year-end prospects despite a waning appetite for luxury in some of its key markets.

In the first nine months, sales rose 14.3 percent to 828.4 million euros, with double-digit gains across all brands and product categories. At constant exchange rates, sales were up 16.5 percent compared with the corresponding period last year.

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Chief financial officer Emilio Macellari was cautiously optimistic about the full-year performance, and stuck to previous forecasts of approximately 1.14 billion euros in sales, 13 percent higher than in 2022 when the Italian leather goods specialist surpassed the 1 billion euros revenue mark.

During a conference call with analysts on Wednesday, Macellari added that full-year EBIT [earnings before interest and taxes] margin should hit 8.2 percent, compared with last year’s 5.8 percent.

Founder and majority owner Diego Della Valle said in a statement that he was “confident” about the company’s performance in fiscal 2023 due to robust sales and a “constant attention to cost control and improvement of operational efficiency.”

Macellari admitted, however, that the forecasts “might be considered challenging” given the normalization in demand that so many luxury goods groups have been witnessing, and a troublesome macro-economic environment.

“The market is tougher now than it was at the beginning of the year, with a slowdown in consumption and demand from consumers,” said Macellari, adding that the year-end results would be “achievable,” provided the macro-economic environment doesn’t deteriorate over the next two months.

Macellari told analysts that despite the impressive growth in the first three quarters, weak spots have begun to appear.

In China, a slowdown in consumption that began at the start of the third quarter continued into October and November, although the company is still growing in the double digits.

He noted the Chinese are traveling once again, but they’re spending their money in places such as Hong Kong, Japan and Macau, rather than Europe.

Sales in Japan, where the exchange rate remains favorable for Chinese tourists, have been “very strong” on a month-to-month basis, while Hong Kong has been growing in the triple digits, due chiefly to local tourists, he added.

Similar to many other luxury managers, Macellari said there has been a “normalization” of demand in Europe, although sales in the region have recently begun to pick up in the run-up to the holiday season.

In the first nine months, Tod’s home market of Italy posted growth of 8.2 percent compared with 13.1 percent in Europe, 25 percent in Greater China and 12.9 percent in the rest of the world.

The Americas region declined by 0.5 percent, impacted partly by a handful of store closures and temporary store locations for the group’s biggest breadwinners, Tod’s and Roger Vivier.

Macellari added that while domestic sales in America have been “flat-ish,” demand from American tourists abroad has been “more than encouraging.”

The chief financial officer also addressed many questions from analysts about whether the group had found a replacement for Walter Chiapponi, who left Tod’s in September and has since been named creative director of Blumarine.

On Wednesday Macellari said the company has narrowed the short list to two candidates, and will make an announcement in the “near future.” He also urged analysts not to get too excited about the appointment, saying there will be no major “revolutions or disruptions” in terms of the group’s approach to design.

“We’re not a company that’s too exposed to fashion or seasonality, and most of our sales come from carryover products. We’ve been taking our time to find a talented, creative designer who can interpret the brand’s DNA and who can oversee design, production,” and the overall offer, he said. “There won’t be any dramatic changes.”

He added that Chiapponi had left a strong legacy, which helped to bolster growth in the quarter.

In the first nine months, leather goods and accessories grew 19.5 percent while apparel sales were up 25.1 percent. Both outstripped shoes, Tod’s largest category, which grew by 12.3 percent.

All of the brands saw double-digit growth, with the flagship Tod’s climbing 12 percent; Roger Vivier, 19.1 percent; Hogan, 11.8 percent, and Fay, 22.2 percent.

The company added that the retail channel, which represents more than 73 percent of the group’s turnover, maintained double-digit growth in the nine months, despite the more demanding basis of comparison.

As of Sept. 30, the group’s distribution network consisted of 344 directly operated stores and 94 franchises. Wholesale revenue also grew in the double-digits, the company added.

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