Tom Tailor to exit unprofitable markets, shut stores for growth

Tom Tailor Group's new management team has initiated a set of new initiatives to further improve the profitability of the Group. Through its new growth measures, the company aims to sustainably strengthen earnings power and unlock financial resources for investments in the Group's digital sales channels and brands, while discontinuing loss-making activities. The Group will also withdraw from unprofitable foreign markets, close additional retail stores and curtail selected product lines.

Commenting on the announcement, Thomas Dressendörfer, Chief Financial Officer of Tom Tailor Holding, said: "The textile sector is undergoing a fundamental change in which strong brands like Tom Tailor and Bonita enjoy very good prospects in the marketplace. However, in order to be successful in this environment, it requires an even sharper correction than in the past. The new program that has been decided will release the company from the legacy burden of loss-making operations and will allow us to streamline the business to profitability.”

To close Bonita Men stores, cut jobs and exit markets

Going forward, the activities of the Group will focus on the umbrella brand Tom Tailor with the casual, denim and kids lines, as well as on Bonita women. In future, the company’s Bonita Men brand will be taken off the market. Furthermore, the group is going to withdraw from France and South Africa and revisit the go-to-market approach in China and India.

At the same time, the Group will bring about further reductions in its network of branches. The company projects that the portfolio will be reduced by up to 300 stores in the business year 2017. This means that all the stores for the Bonita Men brand will close. Moreover, up to 150 unprofitable stores of the Bonita Women brand will be closed. Individual flagship stores of the Tom Tailor brand will also be subject to a thorough review and removed from the portfolio if they do not meet their profitability targets. These measures will be associated with a reduction in the number of jobs.

Expects to witness improved profitability in Q4

The company said that the implementation of this cost and process optimisation program has led to a unscheduled one-off charge of around 70 million euros (76 million dollars) in the third quarter of 2016, primarily non-cash expenses. However, the group expects the fourth quarter to display first positive effects in the EBITDA and improve profitability and achieve a higher reported EBITDA margin in fiscal year 2017.

“Tom Tailor Group has a very robust core. This includes our exceptionally strong wholesale business as well as the retail activities of our brands Tom Tailor and Bonita Women. Concentrating on and further optimizing this core will enable us to sustainably improve the profitability of the group. We will therefore streamline the portfolio of brands and stores, withdraw from selected foreign markets and reduce complexity in our products, processes, and organization,” added Heiko Schäfer, COO and interim CEO of the company.

Picture:Tom Tailor