(Filed Under Financial and General Interest News). Parent company Van de Velde reported an overall rise of 9.4% in sales in the first half of 2014. But at its U.S. retail division, Intimacy, there was a “fall in retail turnover ... by 22.7% (14.1% on a like-for-like basis) in local currency. Due to the weakening of the US dollar against the euro, the fall in euro was greater.”
The company also reported it has now calculated an “impairment of $22.1 million” to the value of its 16-store Intimacy chain. It said it had valued that retail operation at $42.8 million when it acquired a majority stake in 2010.
Sales at Van de Velde in the first half rose from 97 million euros last year to 107 million euros in 2014 (or 10.3%), but the company further noted that “On a like-for-like basis (not taking into account early deliveries of the collection for the second half of the year), consolidated turnover was up 9.4%.” The firm attributed the growth to, among other things, a “13.8% growth in wholesale turnover. This growth was driven by the very successful launch of PrimaDonna Swim and the strong growth in lingerie. Follow-up orders in the first half of the year were also higher than during the same period in the previous year.”
The retail news from Europe was good for the Belgium-based public company. “In continental Europe retail turnover at Rigby & Peller rose by 12.6%, especially due to strong like-for-like growth in Germany (18.9%). Retail’s footprint is increasingly concentrated on Northern Europe (openings in Denmark, franchising in the Netherlands, closures in France and Spain).”
The company also reported, “Retail turnover at Rigby & Peller in the United Kingdom rose by 9.1% (3.9% on a like-for-like basis) in local currency. Due to the strengthening of the UK pound against the euro the rise in euros was greater,” and added, “Retail turnover at the former Donker stores [in the Netherlands] contributed €2.4m (compared with €1.3m for April-June 2013). Turnover at the former Donker stores rose by 13.7% on a like-for-like basis.”
In other positive news, Van de Velde reported its recurring earnings before income tax, depreciation, and amortization (REBITDA) which were € 34.2m for the first half year, “increased by 20.5% and exceeds the record year 2011. On a comparable basis (not taking into account early deliveries of the collection for the second half of the year), consolidated REBITDA (€ 32.3m) rose by 19.2%. The most important reasons for this rise were the following: A rise in wholesale turnover; An increase in gross margin of about 0.5%. This was due to a positive price effect (partly offset by a negative currency effect) and lower stock depreciation; No increase in fixed costs, except for sales-driving costs (such as marketing and customer programs); Increased REBITDA in the retail business of all chains, except for a substantial decrease at Intimacy.”
Looking ahead to the second half of the year, Van de Velde noted that “In wholesale, pre-orders for autumn/winter 2014 are higher than the previous year. This rise is naturally lower than in the first half year because of the absence of the swimwear factor. However, Van de Velde expects a strong rise in wholesale over the whole year 2014. It is difficult to predict how retail and in particular Intimacy will develop. Van de Velde also expects a strong rise in REBITDA for the whole year 2014, but, relatively speaking this rise will be lower than the interim rise. Both turnover and REBITDA rose by an exceptionally high degree in the first half-year.”
In its report on the first half of the year, Van de Velde made special note of the accounting losses it expects from “IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE” that it is recording because of the declines at Intimacy. “As previously announced, the profitability of Intimacy suffered from a further turnover decrease. In 2013 Intimacy’s consolidated EBITDA (including the margin on Van de Velde brands sold through Intimacy) was slightly positive, but this was no longer the case in the first half of 2014. The targets set for 2014 were not achieved and Intimacy’s performance also fell short of the targets set when the majority stake was acquired in 2010. The targets set when the majority stake was acquired were the basis for the valuation of goodwill and other intangible assets in accordance with IFRS [International Financial Reporting Standards] in 2010. The valuation was US$ 42.8m or € 31.4m for 100% of the shares. An interim impairment test was conducted in response to a number of impairment indicators (including the non-achievement of the 2014 targets). This test indicates an impairment of US$ 22.1m or € 16.3m. A revised version of the business plan with lower turnover and EBITDA forecasts was used as a basis for the impairment test. A new evaluation of the business plan will be done on a regular basis. This impairment is purely an accounting measure representing a non-cash charge.”
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