Tom Tailor Q1 sales up 1.5 percent, steps up plan to boost profit

The Tom Tailor Group has started the fiscal year 2016 with a slight increase in sales. In the first three months of the year, sales grew by 1.5 percent to 218.9 million euros (249.3 million dollars). The company said that it benefited from the growth dynamics of the Tom Tailor brand with a positive sales development in both the retail and wholesale business.

“The first months of 2016 were coined by key measures within our "core" efficiency program, on one hand, and growth initiatives in the digital segment, on the other. 2016 will be a year of transformation. We are facing up to this challenge with commitment, a strong team and confidence that we can get the Tom Tailor Group back on the course of profitable growth," said Dieter Holzer, CEO of Tom Tailor Holding.

Initiates measure to grow profitability

In the first quarter, Tom Tailor Group increased the range of products and services offered online and continued to integrate them closely with the stationary business. In mid-March, the company expanded its cooperation with the online retailer Zalando and now has its own brand shop for the Tom Tailor umbrella brand.

In addition, the brand’s online presence in China was expanded: Since the beginning of March, the fashion lines of Tom Tailor, Tom Tailor Denim and Tom Tailor Contemporary Women are offered through JD.com. To continue improving the quality of customer service, the Tom Tailor Group rolled out the application Click & Collect in Germany in March.

Sales up for Tom Tailor umbrella brand

The Group’s growth was carried by the Tom Tailor umbrella brand, which posted a 5.4 percent increase in sales to 151.1 million euros (172.1 million dollars). Both the wholesale and retail segment contributed to this development. Tom Tailor wholesale picked up on the encouraging development from the fourth quarter of 2015. Sales increased by 3.3 percent in the first three months to 87.3 million euros (99.4 million dollars).

The number of shop-in-shops rose by 189 to 3,145 since the end of 2015. The number of franchise stores remained nearly constant over the same period, decreasing from 203 to 202. The retail segment of the umbrella brand achieved a strong sales growth of 8.4 percent, which was mainly due to a year-on-year increase in the number of retail stores, which grew by 77. Since the end of 2015, the number has increased by five to 465. On a like-for-like basis, sales in the first quarter were 2 percent lower than in the prior year period.

The Bonita umbrella brand sales were down 6.3 percent in the reporting period to 67.8 million euros (77.2 million dollars). On a like-for-like basis, Bonita sales were down 5.3 percent. Bonita accounted for a 31 percent share of group sales. The number of Bonita stores decreased by four to 1,022.

Gross profit decreased in Q1

The Group’s gross profits decreased to 116.3 million euros (132.4 million dollars) due to higher costs of materials. As a result, the gross profit margin decreased to 53.1 percent after 55.3 percent in the previous year. Recurring EBITDA for the Group was 8.1 million euros (9.2 million dollars) in the first three months of the year, while the recurring EBITDA margin was 3.7 percent. The year-on-year decrease resulted primarily from the decrease in gross profit. The reported Group EBITDA decreased to 6.3 million euros (7.1 million dollars), and the reported EBITDA margin was 2.9 percent.

The Group expects the accelerating structural change in the textile industry to continue gaining momentum in the coming quarters. Against this backdrop, the Group will continue to move forward as planned with the CORE cost cutting and efficiency program. The goal is to reduce costs, increase efficiency and expand the range of products and services offered through e-commerce.

The Tom Tailor Group expects sales to increase moderately as compared with 2015. The first positive results from the two launched programs are expected to take hold after the end of the current fiscal year. Consequently, the Management Board expects recurring EBITDA to remain on prior year level in 2016.