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UPDATE 1-Tod's keeps first-quarter sales flat with new shop openings
May 14, 2014 / 6:48 PM / 4 years ago

UPDATE 1-Tod's keeps first-quarter sales flat with new shop openings

* Q1 beat expectations as like-for-like dropped

* Group opened 25 shops in past year and plans 20 more

* More shop openings planned in slowing China (Recasts, adds outlook, CFO quotes, detail)

MILAN, May 14 (Reuters) - Italian luxury leather group Tod’s said on Wednesday first-quarter revenue was flat year-on-year as a decline in like-for-like sales was balanced by income from new shops.

The group posted first-quarter sales of 253.8 million euros ($348 million), beating a Thomson Reuters Smart estimate of 245.8 million euros, thanks to growth in Europe outside Italy and in countries including Japan and Korea.

But sales from shops that have been open for more than a year dropped 6.7 percent in the first 19 weeks of 2014, extending a 5.4 percent slide in the first 10 weeks.

“The real explanation is ... the added selling surface or ... the number of stores,” Chief Financial Officer Emilio Macellari said on a conference call, saying around 25 stores had been added to a network of just under 200 since end-March 2013.

The company plans to open around 20 shops this year, Macellari said, including 11-13 in China. It has opened more than 50 new shops in Greater China since 2008.

However, he said the volatility of the Chinese market - where overall sales fell 2 percent in the quarter from growth of over 50 percent in the same period of 2013 - would make the company more cautious about how it proceeded there.

Tod’s sales are lagging behind competitors, including close peer Salvatore Ferragamo which reported a 3 percent bounce in first-quarter like-for-like sales.

For the full year Macellari said he expected a smaller drop in like-for-like sales than seen in the first quarter. Further shop openings and the wholesale business should allow the company to meet sales growth consensus just over 3 percent.

But Tod’s needs sales growth of 5-7 percent to keep margins stable and Macellari said consensus forecasts for EBITDA margins are “challenging”.

Analysts have partly blamed the company’s recent underperformance on its high reliance on shoes which made up 77 percent of sales in the first quarter.

Sales of high-margin leather goods and accessories - which, unlike shoes, do not have to be made in many sizes and take up precious space in storerooms - rose 9.4 percent in the first quarter, but Macellari warned this rate would not continue.

“I think it is more a temporary effect of the first quarter rather than a sustainable growth rate for the full-year 2014,” Macellari said.

$1 = 0.7294 Euros Reporting by Isla Binnie, editing by David Evans

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