Wolford sales and profits slide, works on new 'master-plan'
Upscale hosiery and intimates specialist Wolford reported its half-year results on Friday and they showed that the company still has lots of work to do on its recovery plan. "Wolford is suffering the consequences of a far-reaching structural transformation along with declining customer frequencies in the Western European fashion markets," it said.
Its overall revenues fell 3% in the period to the end of October, hitting €60.49m. And its operating loss was wider by a hefty 58% to €9.38m. The net loss fell an even larger 62% to €11.86m.
So it was no surprise that the results statement described the period as "without a doubt unsatisfactory” and added that the the new executive team of Silvia Azzali and Andrew Thorndike, plus the management team, are currently working “to precisely analyse and understand the problem areas”. They will then develop a “master-plan for [the brand] consisting of short-, medium- and long-term measures”.
The ultimate goal is to achieve "a sustainable repositioning of Wolford as a profitable company with strong product lines and a clear customer orientation,” they said.
And the review will include assessing the "viability of some individual boutique locations". However, while it looks like the company’s directly-operated boutique network could therefore shrink, that doesn't mean it will also shrink its overall physical presence. It said it wants to further expand its presence "where there is a demonstrated growth potential, predominantly with wholesale partners”.
The cost-cutting company has already started doing this and has re-entered Japan after several years, working directly with Isetan Shinjuku in Tokyo, and has seen “important” partner boutique openings in EMEA, including Istanbul Prague and Belgrade. Plus it’s forging ahead with its Chinese expansion under its deal with Fosun Fashion Brand Management and opened three new partner boutiques on the Chinese mainland during the half.
The company has also aimed to generate buzz around the brand with initiatives such as its recent Vetements catwalk collaboration.
Understandably, it's also investing in its online business and has begun working with Farfetch to boost its digital ops. The first pilot project with Farfetch (which as we know, allows orders to be fulfilled from high-end physical stores) was for the Wolford boutique in Milan and resulted in a revenue increase of about 30% within a three-week period, it said. This included many orders from countries in which it hasn't been very active until now such as Hungary and Saudi Arabia.
Looking more closely at the half-year results, the company said the revenue decline during the period was actually worse than the reported 3% when currency effects were taken into account, with a currency-neutral fall of 4.1%. Its own retail business saw its revenue falling 6.8% to €2.79m, or 7.9% currency-neutral and on a like-for-like basis, revenue dropped 5.4%.
It said the falling revenue was the result of lower footfall in its boutiques due to the overall difficult market environment. However, while footfall can be blamed for the problems at the physical shops, it can't be blamed for the issues online. Revenue at its own online business was down 7.5% to a mere €0.52m. This was attributed to the lower number of markdowns available that dented sales volumes. However, at least wholesale performed better with a 0.2% increase on a currency-neutral basis and a flat result as reported.
Regionally, the company’s four biggest markets also declined with France down 2.8%, the US down 5.2%, Germany falling 7% and Austria plunging 15.1%. And there was worse news in Asia, as the ongoing political unrest in Hong Kong and the closure of a store there, sent revenues diving 25.1%.
However, some markets did see increases with Belgium up 8%, Italy almost as strong with a 7.9% increase, Spain up 3.3%, the UK rising 2.3% and Scandinavia 1.9%. Meanwhile, markets in Eastern Europe saw a 14.1% increase as the company expanded its relationship with its most important Russian wholesale partner.
And looking at the results on a category basis, revenue was down in almost all of its product groups with beachwear plunging 25% and accessories 28%. Ready-to-wear fell 9% and lingerie fell 3%. But there was a small 1% revenue rise in legwear, which is the company’s most important product group.
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