Tod's moves on from cozy loafers in bid to recover sales

Wed Aug 6, 2014 1:17am EDT
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By Isla Binnie

ROME (Reuters) - Italian designer label Tod's is edging away from its comfortable driving shoes, ballerina flats and platform sandals in an attempt to diversify its business and revive flagging sales.

The company hired former Gucci designer Alessandra Facchinetti last year to create a limited collection of clothes and accessories, and just last June appointed a new creative chief, Andrea Incontri, for its menswear line.

The strategy is to find new areas of growth after focusing too long on its well-known footwear - and on Thursday the company will offer a look at whether it's starting to work when it releases six-month financial results.

"We are trying to send the message that Tod's is not any longer simply a great producer of high-quality shoes, but also that it is more and more becoming a 'maison'," Chief Financial officer Emilio Macellari told Reuters.

For luxury goods companies, handbags, wallets and other accessories are easier to sell because they don't require a particular fit. A clothes line helps drive those accessory sales by giving the label - and the shop window - the allure of a collection and ensuring magazine spreads.

Lately a slowdown in China, once the sector's growth engine, has hit profits across the luxury goods business. But Tod's high reliance on lower-margin shoes is widely seen as being to blame for sharper falls in sales and profits than its peers have seen.

Footwear, such as its driving shoe which retails at $400-$920, makes up 75 percent of total sales at Tod's Group, of which the Tod's label represents 60 percent of the business. Accessories - which can add around 10 percentage points more to a company's gross margin than footwear or clothing - make up around 16 percent. That compares to more than 30 percent and 60 percent at Salvatore Ferragamo and Prada.

Analysts say that narrow definition contributed to a slump in same-store sales growth, which slowed to 2.3 percent last year from 7.2 percent the year earlier, and a 6.7 percent fall in sales in the first five months of this year.   Continued...

A shopping bag from the luxury brand Tod's is seen along Rodeo Drive in Beverly Hills, California, May 21, 2013.  REUTERS/Fred Prouser