Poor Results at Intimacy Hurt Van de Velde

Van de Velde, the public Belgian lingerie company that owns several international brands and retail operations, announced a slight increase in overall sales despite poor results at Intimacy, its U.S. retail operation. The firm, which owns such lingerie brands as Marie Jo, Andres Sarda and Prima Donna, announced that “consolidated turnover” grew in the first half of 2012 “thanks to Rigby & Peller,” its English lingerie retailer (which operates in about 7 locations and on the internet).

“In the first half of 2012 Van de Velde realizes a consolidated turnover growth of 0.9% (from m€ 97.8 to m€ 98.7),” according to the company announcement. “On a comparable basis (including comparable deliveries and excluding retail turnover of Rigby & Peller UK) the consolidated turnover falls by 2.8%.”

A significant challenge for Van de Velde has been the poor performance of the Intimacy stores among other factors. According to the firm, “This turnover development can be explained as follows: A fall in wholesale turnover by 3.0% mainly due to a decline in back orders for the second quarter of 2012. A fall in the retail turnover of Intimacy of about 10% in local currency and 1.7% in euro.”

On the positive side, the company continued, “In Europe retail turnover of Rigby & Peller (the former Oreia) grows by over 8% thanks to the opening of new stores in Germany and Spain. The retail turnover of Rigby & Peller in the UK contributes for an amount of m£ 4.5 (m€ 5.5). This represents a growth of about 4.5% on a store-to-store basis. “

At the end of April, Van de Velde admitted to severe problems with Intimacy when it published a “Trading Update, Outlook 2012.” In the report the firm noted, “Annual forecasts are an increasing challenge given the rising share (> 20% in 2012) of direct retail turnover (including Rigby & Peller and Intimacy). 2012 will be tough and consolidated turnover growth is not a given: We expect a slight fall in wholesale turnover in 2012. On the one hand, pre-orders for autumn are slightly below expectations and on the other hand, back-orders for the first quarter were weak.”

The report continued, “The main developments in Retail are as follows: Intimacy (USA): After a tough 2011 Intimacy has also experienced a very tough start to 2012, with a marked fall in same-store sales. The market share of the Van de Velde brands is on track, however. Van de Velde takes over operational management [of the Intimacy stores] on 1 May 2012 and has a clear vision on the measures needed to turn the situation around. The first results will be noticeable as from 2013. “

Interestingly, the report states “The acquisition price for 35.1% of the shares of Intimacy (transaction in April 2010) was linked to the achievement of the targets set, so a significant amount of the $13.5m advance will be recovered. The precise amount cannot be determined at this time.”

Reporting on its other retail operations, Van de Velde predicted in April that “Rigby & Peller (United Kingdom) and Oreia (Germany / Spain) realize a rise in like-for-like sales versus 2011.” It also stated that “In a number of Private Shop stores in Hong Kong, Marie Jo, Marie Jo l’Aventure and Prima Donna have been recently introduced. China will follow later.”

“In 2012 Van de Velde will invest additional resources in growth initiatives (including marketing

and sales programmes) that are expected to have positive impacts in 2013,” the company also claimed. “Due to the combination of these factors, EBITDA is expected to fall in 2012 versus 2011, with turnover stable or slightly down. On the basis of the current stock price developments of the Top Form share, it is not excluded that the Board of Directors will consider to account for an impairment at the next reporting date.”