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Wolford Owners Plan Sale Following Losses

(Filed Under Financial and General Interest News). The main shareholder group of Wolford, the high end, Austria-based lingerie, hosiery and apparel maker, announced its plans to sell its majority stake in the company. The terms of the sale, the size of the stake, nor the names of potential buyers were revealed.

The decision to sell comes after losses in several recent years, including a deficit of 6.19 million euros in fiscal 2016, and a projected “operating loss” of between 8.0 and 10.0 million euros for the latest fiscal year, which ended April 30, 2016. (The most recent loss translates to approximately $8.7 million to $10.9 million at current exchange rates).

According to the brief statement June 9 from the company, “The main shareholder group of Wolford AG, WMP Familien-Privatstiftung, Sesam Privatstiftung and its subsidiary the “M. Erthal & Co.” Beteiligungsgesellschaft m.b.H., as well as related parties announced today the intention to sell their stake, which is a majority stake, in Wolford AG. To this end, the shareholders are starting a process, which is supported by Deloitte Financial Advisory GmbH, for the selection of interested parties. Wolford AG will join this selection process. The purchase of the majority stake by a future core shareholder shall be combined with an equity financing transaction that shall strengthen the company’s liquidity on a long-term basis. The issue size has not yet been determined. Wolford is negotiating with the financing banks in order to secure the financing to meet the liquidity requirements up to that time.”

In North America (where according to recent records the company maintains 36 of its approximately 270 worldwide 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 profits, 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 06-12-2017 by Nick Monjo

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