DGAP-News: TOM TAILOR brand reports positive business performance in fiscal year 2018

TOM TAILOR brand reports positive business performance in fiscal year 2018

- TOM TAILOR confirms preliminary results for 2018 published on 9 October 2019

- TOM TAILOR brand grows by 3.4 percent (adjusted) in challenging market environment; EBITDA margin at 10.4 percent

- Write-down on brand value and negative operating performance at BONITA burden Group results

- Adjusted Group revenue of EUR843.8 million achieved

- Gross margin within Group of 58.1 percent on par with previous year

Hamburg, 6 November 2019. As was the case for the entire fashion and consumer goods industry, the TOM TAILOR Group had a very challenging year in 2018, primarily marked by unusually difficult consumption and weather conditions. Nevertheless, the TOM TAILOR brand (excluding the revenue decline due to the cost-reduction and process-optimisation programme RESET and including the license revenue, which was included in the revenue item for the first time) showed continued growth of 3.4 percent to EUR618.1 million (German market -2 percent). Excluding the adjustments, revenue was 5.5 percent below the level of the previous year (2017: EUR654.2 million). By contrast, the gross profit margin increased again from 53.7 to 56.6 percent. Reported EBITDA for the TOM TAILOR brand of EUR64.0 million was slightly below the previous year's level of EUR67.5 million. This was due to a significant rise in provisions for contingent losses of EUR5.2 million for loss-making stores in the Retail segment as well as an increase in marketing expenditure, especially in the area of E-commerce. The EBITDA margin of 10.4 percent, on the other hand, was stable, remaining at the previous year's level (2017: 10.3 percent). The Management Board thus confirms the preliminary results published on 9 October 2019 for fiscal 2018. "This performance is a clear indicator of the strength of the TOM TAILOR brand, its products as well as the sales power of the company. Now the next step is to continue to expand the potential of the TOM TAILOR brand with the clear goal of continuing to grow profitably," says Dr Gernot Lenz, CEO of the TOM TAILOR Group.

TOM TAILOR Retail posts decline in revenue and net income

Revenue at the TOM TAILOR Retail segment declined by 6.9 percent to EUR283.0 million in the year under review (2017: EUR304.0 million). This was primarily a result of lower customer traffic due to store closures, among other things. The decline in revenue could not be entirely compensated in spite of new store openings. E-Commerce also posted a slight decrease in revenue to EUR46.3 million (2017: EUR48.7 million) owing to difficulties with the introduction of new software. The resulting gross profit margin in 2018 was 59.3 percent, compared to 60.0 percent in the previous year. This decline is mainly a result of stronger discount promotions. Reported EBITDA also decreased significantly by EUR11.1 million to EUR4.4 million in the reporting year (2017: EUR15.5 million). The decline resulted both from the lower gross profit margin and from higher provisions for contingent losses.

Profitability increases once more at TOM TAILOR Wholesale

Revenue at the TOM TAILOR Wholesale segment dropped in 2018 by 4.3 percent to EUR335.1 million (2017: EUR350.1 million). This is mainly due to the after-effects of the planned, and in the meantime implemented, closure of regional sales activities and the discontinuation of product lines, the aim being to increase profitability. License revenue was also reported under the revenue item in fiscal 2018 for the first time; in the previous year, this was included in the other operating income. License revenue increased by 27.5 percent, from EUR6.9 million to EUR8.8 million, due to the outlicensing of the TOM TAILOR KIDS line. The gross profit margin performed very well, rising from 48.4 percent to 54.3 percent as a consequence of continued improvements in product entry calculations, the license revenue as well as fewer sales promotions. Reported EBITDA performed just as positively, rising by EUR7.6 million or 14.5 percent to EUR59.6 million (2017: EUR52.0 million). The reasons for this were the increase in gross profit margin as well as significantly lower HR and marketing expenditure in particular.

BONITA posts significant decline in revenue - provisions for contingent losses and brand value write-down burden result

The BONITA segment was particularly strongly impacted by a reluctance to purchase on the part of customers in the Best-Ager segment and posted a negative performance in the course of fiscal 2018. Overall, revenue decreased by 15.7 percent to EUR225.7 million (2017: EUR267.7 million). The gross profit margin sank by 7.6 percentage points to 62.1 percent (2017: 69.7 percent); EBITDA was minus EUR38.2 million (2017: EUR15.6 million). This was due to the decline in operating performance as well as an increase in provisions for contingent losses by EUR17.2 million as a result of a more conservative assessment of the future business performance. In addition, the weaker performance of BONITA in the year under review as well as a reassessment of the future profitability of the segment led to a significant write-down on the brand value as of 31 December 2018, amounting to EUR184.5 million. As a result, the Management Board of the TOM TAILOR Group re-intensified their efforts to restructure BONITA and will continue to push ahead with this in the future. At the same time, all value-creating options, including the sale of BONITA, are being assessed.

Adjusted Group revenue target for 2018 achieved

The revenue target for the Group of EUR840-860 million, adjusted by the company in September 2018 and confirmed in October 2019, was achieved. It amounted to EUR843.8 million (2017: EUR921.8 million), however it was 8.5 percent lower than the previous year's level. This was driven by both the declining performance in traffic due to store closures, among other things, as well as the significant decline in revenue at BONITA. Taking account of the RESET closure effects (including the license revenue included in the revenue item for the first time), Group revenue sank by 1.1 percent in the year under review. Gross profit dropped to EUR489.9 million (2017: EUR537.7 million), while the gross profit margin remained almost constant at 58.1 percent (2017: 58.3 percent). Reported EBITDA at the TOM TAILOR Group amounted to EUR25.7 million, compared to EUR83.1 million in the previous year. Reported EBITDA margin was 3.0 percent, considerably below the previous year's level (2017: 9.0 percent) and also below the specified forecast figures (7.5-8.5 percent in September 2018, and 6.0-6.5 percent in December 2018). Reported EBIT for the Group was burdened by non-cash one-off effects such as the full write-down of the brand value of BONITA amounting to EUR184.5 million as well as further special write-downs amounting to EUR16.2 million in the year under review; reported EBIT therefore amounted to minus EUR216.2 million (2017: EUR43.9 million). "In spite of the fact that we achieved our adjusted revenue target for 2018, our profitability within the Group has decreased considerably. In future, we will place a stronger focus on our core expertise and put all our efforts into ensuring that the TOM TAILOR Group becomes a company with strong growth and profitability in the long run," says Christian Werner, CFO of the TOM TAILOR Group.

Net debt was EUR139.3 million in the year under review (2017: EUR113.3 million); free cash flow decreased to minus EUR14.2 million (2017: EUR56.9 million).

"2018 was a difficult year for the entire fashion industry and after a turbulent 2019 for the company the aim now is to carefully evaluate the situation and determine the right way forward. I look forward to my new role," says Dr Gernot Lenz, the new CEO of the TOM TAILOR Group.

Strategic alignment with profitable long-term growth

The growth strategy of the TOM TAILOR Group will be refined on an ongoing basis under the new CEO. The strategic priorities remain unchanged: Profitable growth in the core markets as well as in existing and new growth regions (e.g. Eastern Europe, Russia and Spain), growth in women's fashion and expansion of digital sales channels.

KEY FIGURES TOM TAILOR GROUP
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About TOM TAILOR Group
TOM TAILOR Group is an international, vertically integrated fashion company focused on casual wear in the medium price segment. The product portfolio is complemented by an extensive range of fashionable accessories. With its brands, the company covers the various core segments of the fashion market. The TOM TAILOR brand is marketed through the retail and wholesale segments, and thus through single-label stores as well as wholesale partners. These include 454 TOM TAILOR stores and 185 franchise stores, 2,541 shop-in-shops and 7,393 multi-label points of sale. The brand is present in more than 32 countries. The BONITA brand has 727 retail stores and 80 shop-in-shop spaces. The collections of both brands are also available through their respective online shops.

Information is also available at www.tom-tailor-group.com

Investor Contact
Viona Brandt
Head of Investor Relations
TOM TAILOR Group
Telefon: +49 (0) 40 58956-449
E-Mail: [email protected]

Media Contact
Erika Kirsten
Senior Manager Corporate Communications
TOM TAILOR Group
Telefon: +49 (0) 40 58956-816
E-Mail: [email protected]