Tod's moccasins have defeated the royals and Hollywood – but not many of the millennials

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CASTE D'ET, Italy-

Tod & # 39; s


TOD -0.70%

SpA has built a multi-billion dollar business in the back of chic leather moccasins worn by royals and Hollywood stars. Attracting the attention of the younger generation of consumers has not been so easy.

Diego Della Valle, chairman and majority shareholder of Tod & # 39; s, has indeed amortized millennia and largely sticks to a refined paperback in the 1980s: use expensive and high quality leather, as well than classic patterns and colors to make shoes at $ 500. in Italy.

The scenario shows its age at a time when the millennials – defined by the Pew Research Center as people born between 1981 and 1996 – stimulate the growth of other luxury companies. Many of Tod's competitors have changed their designs to attract these young consumers and have relocated the Western European manufacturing industry to reduce costs.

Tod's, who also owns the Hogan luxury sneaker brand, outdoor wear maker Fay and high-end shoe maker Roger Vivier, has seen his sales decline in the last three years after an increase of 17 of the 18 previous ones. Tod's brand contributes a little less than half of total revenue.

Net income at Tod's declined for five consecutive years, after growing every year for a decade. Analysts expect further decline in earnings as Tod's releases its 2018 results on March 11.

The stock has dropped 70% since 2013 and is near a 10-year low. The 62% stake of Mr. Della Valle and his brother is valued at 860 million euros ($ 968.9 million), or about 2 billion euros less than before.

Mr. Della Valle, 65, acknowledges his recent mistakes: the brand was slow to invest in online sales and adopt marketing tactics such as social media campaigns and more frequent product launches. It tackles these problems but is also committed to adopting a position that has worked for society for nearly four decades.

"We are not going to chase the millennia," said Della Valle in an interview with his villa in Casette d'Ete, a small town on the Italian Adriatic coast. At best, he says, Tod's targets the oldest age group, between the ages of 23 and 38: "We want our clients to be 35 years old and then keep them."

Tod's brand was worn by Princess Diana, Uma Thurman, Queen Rania of Jordan and Kate, Duchess of Cambridge, among others. Tod's also sells handbags, including the iconic D Bag, posthumously nominated for Princess Diana, one of the brand's first customers.

The brand earns less than 15% of its generation Y turnover against 33% for Louis Vuitton, more than 50% for Gucci and 65% for Saint Laurent, according to UBS estimates.

According to the investment bank, one of the main reasons is that of Instagram, where Tod has only 1.3 million followers, the smallest audience among 23 major luxury brands. Gucci has 31.2 million, Prada 17.9 million and Burberry 13.5 million.

To attract attention, Tod's has recently started offering new products to stores every two months instead of twice a year. Over the last 18 months, Mr. Della Valle has changed many senior executives, appointed a new co-director – he also holds this title – revived logistics and launched new initiatives used by other luxury brands for years, such as limited selling. publishing products.

"There are things we are changing today that we should have changed a year and a half ago," said Della Valle. Others around him made suggestions, but he was reluctant to change in the business that he had built, he said. "If we had done that, we would reap the benefits today."

Recently, Della Valle asked Tod's executives to focus on increasing revenue by increasing spending on marketing, special events and faster product launches. The company did not specify the importance of the increase in expenses.

Analysts are already skeptical. "In the absence of a point of inflection in the top line and the position of Tod's" large investments "in the horizon, we estimate a turnaround may not happen soon, "said Mariana Horn, an analyst at Berenberg. "Instead, we expect increased investments to weigh on profitability in the short term.

Tod's has also been slow to develop online sales, which account for only about 5% of total sales, including products sold through third-party websites. That's less than half of what many other big luxury companies handle.

A worker sews one of Tod's iconic Gommino moccasins.

A worker sews one of Tod's iconic Gommino moccasins.

Photo:

Tod & # 39; s

In the midst of Tod's recent changes, Mr. Della Valle has refrained from adopting some recent trends in the luxury industry, including the sneaker boom, which has allowed many competitors to focus solely on dress shoes. . The Tod's brand offers sneakers, but they represent only a small portion of total sales.

"I do not want to ruin our reputation and our know-how," said Della Valle, from a lineage of shoemakers. His grandfather made shoes here that he sold at local markets. His father made high-end shoes that retailers sold under their own brand, including American department stores Saks Fifth Avenue and Bergdorf Goodman. In the 1980s, Mr. Della Valle created the brand Tod's.

He grew up in Casette d'Ete, in the Marche region of Italy, where hundreds of small companies made shoes. Many have closed in recent years as production moved to low-cost countries.

Tod's has kept its factory and design studio at its headquarters in Casette d'Ete, although Mr Della Valle spends most of his time between Rome, Milan, Paris and Asia and returns there on weekends .

As Tod's shares fell at the end of last year as a result of disappointing sales figures, Della Valle announced he would increase his stake to 65%.

This did not prevent speculation that he could sell the company. Other Italian family-owned brands, including Fendi, Loro Piana, Gucci and Bottega Veneta, have sold in recent years to LVMH conglomerate Moet Hennessy Louis Vuitton or Kering Co. late last year , American fashion house

Michael Kors Holdings
Ltd.

, which recently took the name of Capri Holdings Ltd., bought Gianni Versace SpA.

"We do not sell anything," said Della Valle.

Write to Eric Sylvers at eric.sylvers@wsj.com