Mar 13, 2015
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Tod's says weak Chinese market continues to weigh on sales

Mar 13, 2015

Italian luxury group Tod's reported an 18 percent fall in core profits on Thursday and said still weak Chinese consumer spending and cold weather in North America had also hit sales at the start of 2015.

"The situation in China is still very tough, consumption there is not restarting at all," Chief Financial Officer Emilio Macellari told an analysts' call.


Although the fall in profit last year was in line with market expectations after management undertook a costly revamp of its product offer and distribution network, the dividend was cut by more than expected, to 2 euros a share from 2.7 euros.

Tod's said same-store sales fell 10.6 percent in the first 10 weeks of 2015 at constant exchange rates, following a 7.1 percent drop in the whole of 2014.

However, the fall in the first 10 weeks was only 3.6 percent when taking into account the positive impact of current exchange rates.

Tod's shares closed up 0.4 percent at 97.35 euros on Thursday before the results were released. The shares had already extended a new year rally after preliminary sales figures were given in late January, having hit a near three-year low of 65.20 on Dec. 12.

But Macellari said the situation in Hong Kong was not recovering after the pro-democracy protests in the former British colony hit luxury sales in the last part of 2014.

He also blamed exceptionally cold weather in the United States in January and February for a drop in comparable sales that was, however, offset by a stronger dollar.

The CFO said the situation had improved since the end of February when best-selling items arrived in stores after shipping issues delayed their delivery.

"This is why we think part of what we're missing can be recovered if not by the end of the (first) quarter, for sure in the second quarter of the year," he said.

Macellari said same-store sales could be back into positive territory towards the end of the year.

Tod's should meet the consensus market forecast pointing to a 5.5 percent rise in revenue this year, with currency effects accounting for roughly half the improvement, he said.

Tod's 2014 earnings before interest, tax, depreciation and amortisation (EBITDA) totalled 193.5 million euros ($205 million), in line with a market forecast of 193.7 million euros, according to Thomson Reuters Starmine's SmartEstimate.

€1 = $1.06/£0.71

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