Strong franc hits sales at Swiss fashion retailer Voegele

Swiss fashion retailer Charles Voegele on Tuesday reported a 62 million Swiss franc ($63.7 million) loss for 2015, providing more evidence of how a strong Swiss franc is putting pressure on the country's retailers.

They have been hit hard by the Swiss central bank's decision to scrapped a cap on the franc in January last year, which made Swiss goods a fifth more expensive in euros overnight.

Charles Voegele, which has lost money five years in a row, has been one of the hardest hit, as the difficult environment stalled its efforts to modernise and deliver on turnaround plans.

"There is no doubt that 2016 will be another challenging year. The stubbornly low level of sales and the ongoing shake-out of the clothing market make structural cost adjustments inevitable," Charles Voegele said.

Credit Suisse has estimated the strong franc has led to Swiss consumers spending up to 11 billion francs -- a tenth of total retail expenditure -- across the border last year.

Clothing and shoes sales in Switzerland fell 5.3 percent last year, and economists said they expected more troubles ahead after job losses and closures at prominent Swiss retail groups.

Charles Voegele's sales fell 11 percent in 2015 to 803 million francs.

"The main reasons for this decline were negative currency effects, intense competition and price pressure in Switzerland, and an exceptionally warm autumn," Voegele said.

Its shares were down 6.6 percent by 0950 GMT.

The company sells mid-market own-brand fashion in nearly 800 shops around central Europe and generates a third of its revenue in its home market.

It said it expected to return to positive earnings before interest, tax, depreciation and amortisation (EBITDA) this year, while aiming for profitability before interest and tax (EBIT) in 2018.

"The new guidance is more ambitious than our estimates -- we had previously estimated flat EBIT to be first achieved in 2019," Zuercher Kantonalbank analysts said in a note.

Both ZKB and Bank Vontobel analysts said the results lagged expectations, while Vontobel said that targeting positive EBITDA this year was necessary for the company to manage its debt.

The company said that a syndicated loan of up to 245 million francs was extended past its expiration at the end of this month, securing financing for the next two years.

"The share remains highly speculative," ZKB said.

$1 = 0.9738 Swiss francs