Wolford loss widens, but it powers ahead with transformation strategy
Wolford took an upbeat stance on Thursday despite reporting a “significant annual loss” for the 2019/20 full year. The upscale intimates specialist may have reported a downturn in revenues and earnings due to the coronavirus crisis, but it said its new management board team is focused on its “comprehensive transformation” and the “first positive results [are] already visible”.
The company, which is listed on Vienna Stock Exchange, said the 12 months to April saw revenues of €118.5 million, down 13.6% year-on-year, as the year only included a few lockdown months.
“The strong lockdown measures and the restrictions imposed on travel due to the global pandemic had a decisive impact on all luxury sales particularly in the months of March and April, when Wolford´s revenue fell by around 60%,” it said.
But the management board, which has been in place since last autumn, “promptly reacted by implementing a crisis response to include short-time working plans, as well as, since the end of March, the conversion of part of their facilities to accommodate Care Masks’ production, to meet the increased worldwide demand, a move that cushioned [the] fall in other revenues”.
Despite adjusting production, it wasn’t enough to rescue earnings and the operating loss widened from €9 million a year ago to €28.7 million this time. The net loss also grew from €11.1 million to €27.42 million.
That said, due to the first-time application of the new IFRS 16 lease accounting standard, Wolford reported a decrease in operating expenses of €16.3 million to €37.81 million. The company also said that the recent successful sale of its HQ will be included in the accounts for the current 2020/21 financial year and will mean an accounting gain of around €49 million.
So, what about that transformation programme? The management board comprises CCO Silvia Azzali and COO Andrew Thorndike and they’ve introduced the PITBOLI (Programme for Immediate Top and Bottom Line Impact) strategy that includes “international store portfolio rightsizing, reducing rental payments, optimising purchasing and procurement, and consistently enhancing efficiency in production and logistics”.
One key measure as part of this is a 50% reduction of the time to market for its products and Wolford aims to get its SS21 collection to the consumer in a “significantly shortened time frame”.
The company has also made “substantial investments in technology and staff for its online business, extended its distribution channels with additional sales partners, and restructured its design, marketing, and sales teams”.
The digital move paid off during lockdowns and by the end of April, online sales saw like-for-like growth of over 41%. June e-revenues were 54% above last year and represented more than 30% of total revenue.
The product portfolio has also been streamlined, with "key foundations being laid to extend the core Wolford brand.”
Thorndike said of this that “despite the severity of its impact, the coronavirus pandemic was and still is not an excuse for us. We stress-tested the PITBOLI programme, revisited and adjusted all initiatives in terms of their effectiveness and timing, and will now consistently push forward implementing them.”
And the company knows that it needs to be hugely efficient in driving through change as it said “management strongly believes that the structural transformation the fashion industry has witnessed during the last months will further and drastically intensify in the near future”.
Yet as mentioned at the start, the company is upbeat and Silvia Azzali added that management “strongly believes that there is a silver lining in all difficult situations. This pandemic has given us the opportunity to review and streamline our brand architecture, not only to help our consumers access and relate to the brand, but to better guide the development of new products and expand our business into new segments. We will boost our digital presence and international expansion, focusing on the brand’s DNA and values, including a strong push to our commitment to sustainability”.
As for the outlook, it’s very difficult for any company to predict, but Wolford is expecting a “return to profitability on an operating level in 2021”. That’s helped by its store estate now being open with the boutiques in Austria, Germany, and Scandinavia able to gradually reopen from mid-April, while those in France, Italy, Spain, and North America only reopened from the end of May onwards, and in some cases only from the end of June.
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