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Della Valle Family Still Mulling Decision About Future of Tod’s Group

WWD 11/10/2022 Luisa Zargani
© Giovanni Giannoni/WWD

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MILAN — As was to be expected, questions about the future of the Tod’s Group abounded during the conference call with analysts held Thursday evening after the Italian luxury company reported a 16.4 percent increase in revenues to 724.9 million euros in the first nine months of the year.

Diego Della Valle, chairman and chief executive officer of the group, was not on the call, but in a statement he reiterated that “the main objectives are to increase revenues and to develop and give ever greater visibility to individual brands, increasing their asset value and, therefore, that of the whole group.”

Indeed, that was a goal underscored in August when the Della Valle family said it was planning to launch a tender offer to delist the company in order to invest in each brand it controls — Tod’s, Roger Vivier, Hogan and Fay — in the medium- and long-term without the limitations derived by the need to report short-term results required by the market.

As reported, the public offer last month did not fulfill the 90 percent threshold condition and during Thursday’s call chief financial officer Emilio Macellari did his best to respond to queries about potential scenarios.

“I am very close to the family but I am not authorized to be an interpreter of the decisions or anticipate them,” Macellari said. “Obviously they are considering that the market has the right to have some clarity and indications” about the future, he acknowledged. 

He pointed to a possibility to delist through a merger via DeVa Finance, entirely held by DI.VI. Finanziaria di Diego Della Valle & C., which launched the tender offer, or through another vehicle, but “as of now a definitive decision has not been made by the family, as they are still considering all aspects and it’s a difficult decision to make,” Macellari said.

One consideration, he related, is that “the transaction is not market-friendly and their attitude is to remain friendly and keep a fair behavior as 54 percent of the market preferred to keep their shares and see what’s next and what kind of value [the Della Valle family could bring to the table]. It was kind of a referendum, which showed that these shareholders are not willing to be squeezed out of the company, and the family is respectful of that market,” wishing to avoid arrogance or unfairness, he speculated, and trying to understand if there is the option to follow through with their plans while even remaining listed.

“They want to have clear ideas, but I presume a decision will be made in a reasonable time frame to announce whether the company will continue to be listed or privately owned by the family.”

When one analyst suggested that a six-month period was mentioned in the offer document as the time within which the Della Valles were expected to decide, Macellari contended that “they have the right to make the decision at any time, and they don’t want to hurry the decision, they want to think twice before making a final statement.”

As a personal opinion, Macellari ventured that he imagined a decision will be presented to the market by the end of the year.

LVMH Moët Hennessy Louis Vuitton has a 10 percent stake in the group and analysts also pressed Macellari about the future of that investment.

“If I am not in the head of the Della Valles, I am even less so in the mind of [LVMH CEO] Bernard Arnault,” he said. LVMH “decided to remain neutral in the tender offer, expressing the intention not to move, not to sell and not to buy, and continue [as a shareholder] even if it becomes a private company.”

Arnault has not publicly disclosed plans or intentions, he continued. “I cannot give visibility because I don’t have it, but [the LVMH stance] confirmed great respect for the Della Valle family and the fair behavior of all parties around the table, whether the company is listed or not.”

In the statement, Della Valle touted the performance of the company in the period ended Sept. 30, underscoring the growth of the Tod’s brand, which reported a 23 percent increase in sales.

Macellari also trumpeted the “excellent momentum” of the label. “Some time ago, people said it was dusty but now definitely the mood has changed, and it has increased its visibility.”

Sales of Roger Vivier rose 11 percent to 179.8 million euros, benefiting from positive currency fluctuations but dented by the restrictions in China, where the brand is very popular, Macellari said. At constant exchange rates, sales would have grown 7 percent. Also the rationalization of the wholesale distribution of Roger Vivier to limit the gray market impacted the performance, he explained.

Both brands have been expanding their customer base with a younger clientele, the executive noted.

Hogan revenues rose 9 percent to 145.4 million euros and Fay was up 7 percent to 33.7 million euros.

By category, sales of shoes, which continue to represent the lion’s share, rose 13 percent to 566 million euros. Leather goods and accessories climbed 39 percent to 114.7 million euros and apparel was up 13 percent to 42.9 million euros.

Italy and the rest of Europe recorded a dynamic trend in consumption during the summer, thanks to purchases by domestic customers and the good presence of infra-European, American and Middle Eastern tourists.

Sales in Europe rose 26 percent to 159.8 million euros and Italy was up 16 percent to 176.2 million euros.

Revenues in the Americas were up 37 percent to 56.8 million euros, slowing down in the summer months given the increase in American shoppers to Europe as well as due to the favorable effect of the strengthening of the dollar against the euro; the month of September showed a recovery in domestic consumption. Macellari was pleased with the performance, while adding that “the only limit is that it’s a small part of our turnover. Our focus remains very, very high. There is big room for growth, because we have a very low level of penetration.”

Greater China was down 6 percent to 211.3 million euros, registering slight signs of recovery in the third quarter given the lower impact of lockdowns and traffic restrictions. But Macellari said the trend in demand in this area remains volatile and uncertain.

“Hong Kong and Macau showed some improvement in the third quarter but are still weak due to the lack of traffic and remain volatile in the fourth quarter.” Macellari remains cautions about the fourth quarter in China, where he imagines a 5 to 9 percent drop in sales.

The company applied an average price increase of 10 percent in 2022 and Macellari believes the same could happen for next year, also as “an attempt to fill the gap between Europe, China and the Far East,” and offering a product range that is more consistent with the level of quality and desirability of the brands.

Sales in the Rest of the World were up 54 percent to 120.8 million euros. Macellari singled out as best performers Japan and South Korea, which together account for between 12 and 14 percent of sales, followed by Singapore and Australia.

Retail sales were up 19 percent to 530.4 million euros, while the wholesale channel rose 11 percent to 194.5 million euros.

As of Sept. 30, there were 327 directly operated stores and 85 franchised units, compared with 312 DOS and 96 franchised units at the end of September last year.

Della Valle said the company would “also pay close attention to the development of e-commerce and, more in general, of the omnichannel strategy, which we consider one of the most important drivers of future development.”

Macellari said the top line consensus of a turnover of 974 million to 975 million euros in 2022 was “reasonable and absolutely feasible” — barring major disruptions — given these results that were “a bit higher than expected.” The consensus for 2023 of 1.40 billion euros “could be even a bit higher,” he added.

“Considering the collection of orders for next spring and the great attention of consumers for the quality and creativity of our products, even within a difficult and unpredictable global market, we are confident that we will be able to achieve good results also for the future,” concluded Della Valle.

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