Tom Tailor finance talks stall, review launched as it releases 'preliminary' results

Earlier this year, Germany-based Tom Tailor’s sale of its struggling Bonita brand to a Dutch company, plus the full acquisition of Tom Tailor by Chinese majority owner Fosun, and a financing deal with the latter all looked quite straightforward.

But with Tom Tailor thinking the purchase price needed to be higher, financing talks dragging on, and disagreement around the Bonita divestment, doubts over a successful end to it all are mounting.

And the situation has also led the firm to delay reporting its final figures for  2018 and the first quarter of this year.

Late on Monday, the company said that while the financing talks between itself, its banks and Fosun were “initially promising,” they “have become increasingly difficult in the past two weeks.” It said that “a satisfactory solution for all parties, which would give Tom Tailor Holding SE planning security, remains possible, but not certain.”

Tom Tailor is planning to sell Bonita to Dutch firm Victory & Dreams International Holding and that would mean a brand value write-down of more than €184 million. It’s currently in ongoing negotiations with the consortium banks regarding their approval of the sale, the adjustment of financial covenants under the consortium loan agreement, as well as a financial contribution by Fosun that should improve Tom tailor’s own cash flow.

To try to reach a resolution, the firm has launched an independent business review (IBR) from Boston Consulting Group (BCG) so it looks like we might have to wait a while for a final outcome.

FINANCIAL RESULTS

And those results figures? Tom Tailor said that it can’t "currently announce with any reliability when the final group financial statements for 2018 as well as the results for the first quarter of 2019 can be published and the Annual General Meeting can take place.”

But it has issued some preliminary figures and said it “held its own in a difficult market environment [in Q1] and has performed better than the competition.” 

Tom Tailor brand turnover for 2018 was up by around 3% to €616.9m, net of its Reset project’s effects, and preliminary gross profit of the brand was down slightly to €349.4m. This corresponds to a gross profit margin of 56.6 % (2017: 53.7%). Preliminary EBITDA rose slightly year-on-year to €70.6m from €67.5m.

“We are satisfied that our core brand continued to develop positively in the previous financial year, despite a very challenging market environment and against the market trend," said CEO Dr Heiko Schäfer. And CFO Thomas Dressendörfer added that the business model “with a healthy mixture of wholesale, retail and e-commerce has proven successful in a very difficult year such as 2018.”

Bonita generated turnover of €225.7m, down from €255.1m in the year (net of the effects of the Reset programme). Gross profit was €140.1m, down from €186.5m.

And in Q1 2019, Tom Tailor saw turnover of €138m, which was broadly flat year-on-year. Gross profit rose slightly to €76.8m from €75.3m. 

Bonita’s Q1 turnover was down to €40.6m from €51.8m and gross profit dropped to €24.9m from €33.4m.