May 8, 2018
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Tom Tailor talks up progress despite sales fall, gets new credit deal

May 8, 2018

Is Tom Tailor Group out of the woods yet? Not quite, but it's getting there. The German fashion company on Tuesday released Q1 results and said its “stabilisation course continues”.

Tom Tailor

What does that actually mean? Good news for the signature brand, but remaining issues at Bonita. And importantly, it also means a major step forward in terms of ensuring the company has sufficient funding to plough ahead with its turnaround plan.

On Tuesday it announced a new €400 million five-year credit agreement, news that was every bit as important as its sales and profit figures as the fashion sector is as much about cash flow as anything else.

“The group has significantly increased its flexibility so that we can systematically drive forward the planned growth initiatives,” it said.

Meanwhile, for the quarter to March 29, it managed to beat the overall German fashion market, which dipped 4.1%. However, that doesn't mean its sales were in positive territory. In fact, they fell 2.2% to €189.7 million.

And group earnings on an Ebitda basis plummeted to €4.1 million from €8.7 million “mainly due to [store] closure effects,” although the reported gross profit margin rose encouragingly to 57.3% from 53.1%. 

The Tom Tailor brand itself recorded a sales rise of 3% to reach €137.9 million, boosted by wholesale that was up almost 6% to nearly €81 million. Unfortunately though, retail sales dropped 0.4% to €57.2 million, although that was mainly driven by a 5% fall in store numbers. And on the upside, the closure of less profitable stores helped to boost the gross profit margin by 4.7% to 57%.

The company talked up the brand’s successful collaboration with Naomi Campbell earlier this year and looked ahead to the August launch of its collab with rock band Revolverheld, which it clearly expects to drive sales higher. 

But what about Bonita? While the company said that the label’s sales were in line with its plan, they weren't very impressive, although it had a good excuse as store numbers have been reduced by 12.6%. However, that reduction in store numbers didn't completely account for the sales drop as turnover fell 14.1% to hit €51.8 million. 

The company cited “declining market development” as being part of the problem, as well as saying that the cold weather meant some of the product in its stores was wrong – there was too much warmer weather clothing on offer.

Looking at the overall group performance, CFO Thomas Dressendoerfer said it all showed that the company can gain market share in Germany and that its stores in Russia, the Benelux countries and Austria are “developing positively”. Meanwhile, its export markets such as Southern Europe, the Baltic States and Scandinavia “are also showing promising growth.”

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