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Wolford Expects €8 to €10 Million Annual Loss

(Filed Under Financial and General Interest News). “Wolford anticipates an operating loss between EUR -8.0 million and EUR -10.0 million,” according to the firm. This translates to a loss of approximately $8.7 million to $10.9 million at current exchange rates for its fiscal year which began in May, 2016.

In its last fiscal full year, ended April 30, 2016, the Austrian hosiery, lingerie and apparel producer reported a loss of €6.189 million (about $6.7 million) on worldwide sales of €164.4 million (about $179 million).

In the first nine months of this fiscal year, the company’s sales dropped from €128.713 million (about $140 million) for the period that began in May, 2015, to €119.054 million (about $129 million). In the period, the company ran up a huge loss of €5.666 million (about $6.2 million) for the nine months compared to a profit of €696,000 in the prior year.

In North America, where the company maintains 36 retail locations as well as a wholesale business, sales for the most recent nine months fell to €23.386 million (about $25 million) from €24.975 million in the previous nine months. EBIT (earnings before interest and taxes) fell to a loss of €1.276 million for the period, from a smaller loss of €415,000 in the prior year. Interestingly the average number of employees in North America rose from 98 to 108 in the most recent nine months. The number of stores on the continent has remained unchanged from last year.

For the company as a whole, “Wolford-owned retail stores reported a drop in revenue of €5.46 million (-6.6 %), as did the wholesale business, where revenue was down by €3.48 million (-7.3%) compared to the first nine months of the previous financial year. In contrast, Wolford’s own online business expanded once again with total revenue in the first nine months of 2016/17 at €0.43 million or a 4.4 % rise from the prior-year level.”

In a letter to shareholders CEO Ashish Sensarma and COO and CFO Axel Dreher explained, “Mistakes were made in implementing the measures to increase revenue. This particularly relates to the hasty reorganization of goods management for the retail sector, which led to flawed demand planning and management of sales space. Together with changed delivery dates for the fall/winter collection, Wolford did not have a sufficient supply of products or too little new merchandise at the point of sale in the period May to October 2016. On the one hand, this resulted in a considerable decline in revenue. On the other hand, it led to costly post-production and significantly higher inventories.”

The executives listed steps to increase sales and profts, noting among other things that “The B2B online platform for wholesale customers which went live in September got off to a good start. In the meantime, it already handles 34 percent of customer orders. We believe this will lead to an optimized service for our commercial clients as well as a significant rise in efficiency. However, efficiency enhancement will first become more perceptible in the medium-term and bear fruit later than planned. Besides unplanned expenses will negatively impact our business results, for example provisions for a legal conflict with a former partner in Switzerland, or the risk provision for disputed claims against American customs authorities.”

They concluded, “In the light of the unsatisfactory revenue development and the losses expected in the current financial year, we will not be able to adhere to our ambitious medium-term planning, which is being currently subjected to a comprehensive overhaul. In addition, we are now focusing on further stabilizing revenue and continuously reducing costs. The objective is to create the pre-requisites enabling our return to profitability. At the same time, we are working on a sustainable financing structure with a corresponding long-term financing of assets.” — NM

more Financial and General Interest News >>

Published 05-11-2017 by Nick Monjo

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