Tod’s to Focus on Expanding Current Brands, CEO Della Valle Says

Tod’s SpA (TOD) Chief Executive Officer Diego Della Valle said he’ll focus on developing brands he already owns in the next two years, while ruling out selling a stake in the Italian maker of $1,595 handbags and $425 loafers.

“We have a lot to do at home,” Della Valle said in an interview with Bloomberg Television, calling Tod’s structure “perfect as it is.” While his family’s “DNA is more buyer than seller,” he said, “our focus for a couple of years” is on Tod’s existing brands that have high growth potential.

Tod’s, which today reported a 7.6 percent increase in 2012 earnings and said initial results were “positive” in 2013, cut wholesale distribution in Italy by about 20 percent last year to reduce exposure to Europe’s fourth-largest economy, which is mired in recession. Tod’s plans to open more Hogan and Fay stores outside the country and increase sales from leather goods as it seeks to become more profitable like Hermes International, according to Exane BNP Paribas.

Della Valle and his family own about 57 percent of Tod’s, the Sant’Elpidio a Mare, Italy-based leather-goods maker that also creates products under the Hogan, Fay and Roger Vivier brands. The executive’s other investments include 15.6 percent of New York-based retail chain Saks Inc. (SKS) and an 8.7 percent stake in RCS MediaGroup SpA (RCS), the Milan-based publisher of Italy’s biggest newspaper. Billionaire Bernard Arnault, CEO of LVMH Moet Hennessy Louis Vuitton SA (MC), owns 3.5 percent of Tod’s.

Industry Consolidation

Strong balance sheets and excess cash are likely to drive further consolidation in the luxury business, Citigroup analysts have said. Swatch Group AG (UHR) this year acquired Harry Winston Diamond Corp.’s watch and jewelry unit for $1 billion while PPR SA, the French owner of Gucci, is among companies said to be interested in buying Italian jeweler Pomellato SpA.

Consumer spending in Italy, where Tod’s gets about half of its revenue, is “very weak” and is unlikely to improve in the short-to-medium term, Della Valle said in the March 6 interview at Tod’s headquarters.

“Thankfully, we’re doing very well in the world, not only in Asia, and this allows us to manage the development” of the company, he said, adding that revenue hasn’t slowed in China.

Tod’s will open a minimum of 20 to 30 stores in 2013, at least half of which will be in Asia, Della Valle said. The rest will be in the Americas with a few in Europe, including Italy.

“We’ve always had a policy that is aggressive, yet prudent,” Della Valle said of Tod’s retail expansion. “We’re not going to change it.” Investments this year include hiring “hundreds” more staff and building a new factory that will be ready in 2014, he said.

Growth Trend

Earnings before interest, tax, depreciation and amortization climbed to 250.2 million euros ($324 million) in 2012 from 232.4 million euros a year earlier, Tod’s said today in a statement. Analysts expected the shoemaker to report Ebitda of 249.2 million euros, according to the average of 23 estimates compiled by Bloomberg.

Following an 8.2 percent rise in same store sales in the first 10 weeks of the year, “I am confident that also in the current year our group will keep its growth trend,” Della Valle said in today’s statement.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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