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Tom Tailor reports 1.5 percent rise in revenues

Business |REPORT

Tom Tailor reports 1.5 percent rise in revenues

By Prachi Singh

10 Nov 2015

The Tom Tailor Group said that it achieved further growth in the first nine months of 2015 despite the ongoing challenges posed by the market. The company posted sales increases in all segments, with a group-wide increase in revenues of 1.5 percent to 689.6 million euros (741 million dollars).

“Considering the difficult market environment, we are quite satisfied with our sales development in the first nine months of the year. Our umbrella brands have again demonstrated their strength and outperformed the market as a whole,” said Dieter Holzer, CEO of Tom Tailor Holding, adding, “After the income-side setback in the third quarter due to significant start-up problems at our new logistics center, we will make the best possible use of the remaining months of this year.”

Reports sales increases in all segments

The retail business of the Tom Tailor brand maintained its upward trend from the previous quarter and posted a 6.4 percent increase in sales. As a result, the segment showed an overall sales plus of 3.4 percent for the reporting period despite a slow start to the year. Ecommerce venture delivered strong results, with a 9.6 percent sales increase compensating the decline in the first half of the year. The number of Tom Tailor retail stores increased by 55 to 437 since the end of 2014.

Sales for the Tom Tailor wholesale business rose by 0.9 percent but declines 6.4 percent during the third quarter. Since the start of the year, the number of shop-in-shop spaces has increased by 217 to 2,903. Meanwhile, franchise shops have decreased from 206 to 197, mainly through the conversion of shops into the retail organisation.

Sales of the Bonita brand increased slightly from January to September by 0.8 percent, thus the brand now accounting for a 35.2 percent share of group sales. The brand’s performance was dampened in the third quarter especially because of the weak market environment in August, resulting in a 3.9 percent year-on-year decrease in sales. The number of Bonita stores increased to 1,023 as of September 30, 2015.

Cost reduction program – ‘CORE’ launched

To strengthen the group’s long-term competitiveness in a challenging market environment, the Tom Tailor Group launched a comprehensive cost reduction and efficiency program. Under the ‘CORE’ program launched yesterday, the company will focus on its core brands, optimize the store network in terms of profitability, and reduce the operating costs. The goal is to bring about substantial gains in the company’s efficiency, improve processes and the cost base and, in combination with the verticalisation efforts already underway, position the Tom Tailor Group for profitable growth in the long term.

Investments in expansion lead to low profits

Gross profits for the group in the first nine months slightly increased by 0.1 percent to 385.9 million euros (414.5 million dollars). The gross profit margin was down by 0.8 percentage points to 56 percent, which the company said was a result of investments into the product as well as a lower gross profit margin for Bonita.

The company also opened a new, state-of-the-art logistics center in June 2015, thus creating a central and fully operational warehouse for the Tom Tailor brand. The launch of the new facility by the logistics partner was followed by at times substantial delays in the shipment of goods in the third quarter. This reduced the Group’s gross profit by 7 million euros (7.5 million dollars).

Reiterates forecast for fiscal year 2015

On September 21, the company concretized its forecast for the current fiscal year. The Management Board now anticipates a moderate increase in group sales to 945-955 million euros (1,015 million dollars- 1,026 million dollars). In addition, the group expects to achieve a recurring EBITDA in the range of 75-80 million euros (80.5 – 85.9 million dollars). In view of the coming Christmas season and the current economic and consumer climate, the Management Board of the company has maintained a positive outlook for the fourth quarter.