Tod´s Future

Tod´s is an Italian footwear manufacturer with almost 100 years of life, controlled by the Della Valle family, which maintains around 60% of the capital. Among its main brands are Tod’s, Fay, Chiaparelli and Hogan, among others. Until a few days ago other reference shareholders were Arnault Bernard, CEO of LVMH, with more than 3% and fund manager Oppenheimer with almost 5%.

However, the company suffered a real quake when Andrea Bonomi announced the purchase of 3% of the manufacturer’s capital through its Strategic Capital fund. Tod’s share rose 15%, a daily increase that has not been seen in 14 years, since November 2002. Its stock market value is now around €2.2 billion. The increase was because the purchase of Bonomi triggered speculation of a change of the strategy of the firm, after the collapse suffered by the stock from 2013 until the end of last year. Its shares fell from their record highs above 140 euros to the 45-euro lows of July 2016, down 70%.

According to Diego Della Valle, Tod’s main shareholder, president and CEO, Bonomi’s entry will not change the company’s strategic plan or its current share structure. For the owner and grandson of the company’s founder, Bonomi´s purchase is positive for them, as it entrenches the long-term growth bet and believes Bonomi did well to buy that stake, suggesting that the shares will be worth more in the future

It seems clear that the entry of Bonomi is not hostile. Firstly, because Della Valle family owns 60% of the capital, so it controls the shareholding completely. On the other hand, it should be remembered that Bonomi and Diego Della Valle have previously collaborated: both were part of a group that launched a takeover bid on RCS MediaGroup, owner of newspapers like Corriere Della Sera and El Mundo, among others, but finally lost that battle against the group led by Urbano Cairo.

Anyway, it seems possible that the entrance of Bonomi supposes a change in the direction of the company. For example, in topics like the pace of launching new products, accelerating it to adapt to the new digital age of electronic commerce. It could also expand its activities towards new products, as currently more than 90% of its income comes only from leather products.

Whatever it is, it must convince the experts, who currently recommend underweight the stock with a target price of 51 euros per share, well below its current market price.

Disclosure: The Luxonomist is not responsible for the views expressed in the article. The text has been written freely expressing their own ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.