November 6, 2019 / 5:31 PM / 9 days ago

Tod's nine-month sales slip; hit by Italy weakness, Hong Kong protests

MILAN (Reuters) - Italian luxury group Tod’s (TOD.MI) posted a fall in nine month revenues and said it would be “challenging” to meet analysts’ full year profit forecasts as it steps up investments to bolster sales hit by a weak domestic market and turmoil in Hong Kong.

FILE PHOTO: Shoes of Italian luxury shoemaker Tod's are displayed in the window of the company's store in Zurich, Switzerland, April 25, 2019. REUTERS/Arnd Wiegmann

The closely watched same-store sales figure fell by 4.7% in the period, signalling a small deterioration compared to a 4.5% drop in the first half of the year, the shoes and leather goods company said on Wednesday.

Overall sales fell to 678 million euros ($750.6 million) at current exchange rates, broadly in line with an average analyst estimate of 676 million, according to a Reuters poll.

Diego Della Valle, the group’s founder and top shareholder, said the “highly competitive context” meant it was important to accelerate investments to support top line growth.

“Assuming no further turbulence from the markets, we believe that we will soon be able to obtain the expected results,” he said in a statement.

However, investments are likely to dent profitability in the short term: CFO Emilio Macellari told a conference call with analysts that while he was confident of reaching market consensus on revenues, forecasts for earnings before interest, tax, depreciation and amortisation (EBITDA) were “feasible but challenging”.

Like other luxury goods makers, Tod’s, best known for its trademark rubber-soled loafers, has been hit by the weeks of anti-government protests and unrest in the Hong Kong, adding to pressure from weakness in its home market.

In the first nine months, sales in Italy — the group’s main market — decreased by 10% due to the weakness of its wholesale business.

Greater China rose 0.7% at constant exchange rates as mainland China, which represents more than 60% of the region, “more than offset the sharp slowdown” recorded in Hong Kong, the company said.

Sales at the main group brand Tod’s dropped by almost 10% in the January-to-September period, while Roger Vivier grew by 11%.

Reporting by Claudia Cristoferi, editing by Silvia Aloisi and Kirsten Donovan

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