Luxury fashion company Tod’s is currently trying to reinvent itself, adjusting its product and moving from a two-seasons-a-year model to a new-season-each-month one. And it seems that the plan couldn’t come soon enough because tough conditions mean the luxury sector is currently in need of a change.
The company has just reported its first half results and it doesn’t make easy reading. Q2’s general slowdown, plus tough times in China, and the fact that there just aren’t so many high-spending tourists in ‘destination’ cities like Paris, meant sales were down.
In a fine example of understatement, CEO Diego Della Valle said the Tod’s figures reflected “an industry and market environment still characterised by instability and uncertainty.”
But he also said the company would innovate, will introduce a major new cross-channel marketing strategy and that the winter collections have been given a good reception both by consumers and “the market”, by which we have to assume he means analysts, investors and buyers.
That sent the firm’s shares up 2% despite an H1 sales fall of 3.4% to €497.6m, or a 4.3% fall if currency exchange benefits were factored-out.
Revenues at directly operated stores fell an even worse 4.9% to €311.2m and the figure for comparable sales? A painful 14.3% plunge.
How did it do brand-by-brand and as far as individual categories were concerned? The star Tod’s brand’s sales fell 7.2% with weakness across Europe and the US due to that tourist slowdown, and in Greater China due to a slowing economy. Hogan fell 2.5% on the back of lower tourist spending in Italy in Q2.
Footwear, which is the company’s mainstay category, dropped 2.5%, although that was partly due to tough comparisons with last year and delivery timings.
There was even worse news for leathergoods and accessories, which fell 10.7% as Tod’s branded product in those categories underperformed.
There was a bit of good news though: Fay sales soared 8.8% and grew in double-digits in Asia. And Roger Vivier rose 6.2%. However, those are among the firm’s smaller brands with sales of €24.9m and €83.4m, respectively and while apparel sales rose 3.2%, again, that’s a relatively small category for the firm (€27.3m).
Geographically, sales were down 2.7% in Italy, and 1.7% in the rest of Europe with extra weakness in France and the UK. They fell 6% in the Americas and 9.5% in Greater China (mainly due to Hong Kong with just a slight fall in the rest of China).
But at least they rose 4.1% in the rest of the world, largely because of strength in South Korea. But of course, a buoyant South Korea can’t rescue the luxury sector alone. And while companies like Tod’s are transforming themselves, it will take more than strategy changes to encourage consumers to start buying €1,000 bags again in a world where the economy is so uncertain… especially when companies like Coach and Kate Spade make equally desirable pieces at less than half that price.