Tod’s, the struggling Italian fashion company, is considering the potential for a stronger partnership with luxury conglomerate LVMH. While no discussions or decisions have been made yet, the announcement from LVMH about its intention to increase its stake in Tod’s to 10% has sparked speculation about future collaboration and a potential acquisition. Tod’s finance chief, Emilio Macellari, mentioned in a recent conference call that both companies “spoke the same language” and could explore further cooperation on both an industrial and commercial level. One example he highlighted was the possibility of sharing retail space in shopping malls.
However, Macellari was clear that no formal talks or decisions have taken place with LVMH at this point. Tod’s Chairman and founder, Diego della Valle, has a long-standing relationship with LVMH’s CEO, Bernard Arnault, as he has been a board director at LVMH for the past two decades. Arnault is known for his empire-building through acquisitions.
In terms of financial performance, Tod’s recently reported a recovery in sales for the first quarter, with a 19% growth compared to the previous year (adjusted for currency fluctuations). This growth was driven by a significant increase of 142% in sales in China, which was the first region affected by the COVID-19 crisis but also the first to reopen stores and ease travel restrictions. Despite this positive performance, Tod’s overall revenue for the quarter only reached 178.7 million euros ($215.76 million), slightly surpassing analysts’ forecasts but still below the 216 million euros achieved in the first quarter of 2019. The Americas saw a 15% decline in revenue, and Europe experienced a double-digit decline due to new lockdown measures implemented earlier this year.
Tod’s has faced challenges in recent years, with last year’s pandemic-induced downturn leading to a nearly one-third drop in revenue, making it one of the worst performers in the fashion industry. However, the company’s stock has experienced a significant rally, rising by 57% in just over a month following LVMH’s stake acquisition news and the announcement of Italian influencer Chiara Ferragni joining the board. According to Macellari, Ferragni’s appointment aims to attract younger customers to Tod’s.
Despite the challenging circumstances, Tod’s remains optimistic about the future. Macellari expressed confidence in achieving the consensus forecast of 741 million euros in sales for this year, which represents a 16% increase compared to last year. He stated that reaching this target is “totally feasible.” As Tod’s explores potential opportunities with LVMH and continues to focus on attracting a younger audience, the company remains hopeful for a successful turnaround.
Useful links:
1. Vogue Business: LVMH to Increase Stake in Tod’s
2. Business of Fashion: Tod’s Recovering Sales Blur LVMH Partnership
