Wolford Q1 sales fall on heatwave, fashion missteps, but VM concept scores
Wolford’s revenue decline is continuing with the company on Friday reporting its first-quarter figures and announcing that revenue dropped 14% to €25.01 million, although it was a slightly lower 12.2% drop on a currency-neutral basis.
However, there was some slightly better news as the upscale hosiery and intimates company said that its ongoing cost-savings program meant that its operating earnings (on an EBIT basis) actually rose, even though marketing costs were higher.
Not that this was a cause for the firm to pop the champagne corks as it remains loss-making. EBIT in the first three months of the current 2018/19 financial year was a loss of €7 million, compared to €7.22 million in the prior-year period. And the loss after tax got bigger, hitting €7.56 million after it had lost €6.91 million a year ago.
And it seems that one of the big problems was the fact that it’s “a brand which mainly stands for legwear.” Wolford particularly suffered from the heatwave prevailing over the past few months. But it also admitted to a fashion misstep saying that “this year’s summer collection aroused even less interest than was originally expected as a consequence of the months-long vacancy in the position of chief designer.”
The company has been struggling with weak results for some time but seems to remain confident about its prospects having successfully concluded a capital increase in July that raised around €22 million. As a result, the equity ratio improved considerably to 39% compared to 29% in the previous year. The repayment of loans also led to a significant 46% drop in net debt, from €37.9 million to €20.56 million.
It also said that it achieved “an important milestone in its global market presence by rolling out a new retail display window concept.” The new concept was installed at close to 120 stores in August. Different seasonal product information and image films about Wolford can be seen on several video screens in every window, combined with the corresponding products from the current fashion collection.
And importantly it said that the response has been “very encouraging,” especially with more young consumers seeing the display and going into its shops. In August alone, sales of the newly presented Fatal dress promoted via this VM concept rose by about 75% compared to the previous year.
The company is systematically pressing ahead with expanding its business in Asia where it said the revenue trend “is moving in the right direction.” Revenue on the Asian market rose 13% in Q1. Wolford is currently working on a marketing strategy for China and commercial ties with Chinese business partners are being “significantly expanded, applying to partners both in the online business and physical retail.”
So does the company think that this will help it turn in better results in the future? It’s hard to say. It said that earnings generated in the “traditionally weak” first quarter “do not comprise the decisive factor determining the performance of the company in the rest of the financial year.” That means management expects positive operating earnings (EBIT) in the current financial year, "especially due to the positive impact of its restructuring program," but it looks like we'll have to wait and see just how the year turns out as the firm's recovery has been a long time coming.
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