Tom Tailor cuts outlook, profits hit by heatwave, markdowns and the Bonita brand

A profit warning has sent Tom Tailor’s shares tumbling. The hot summer kept customers away from the shops, said the company in Hamburg. And there were issues with the Bonita brand and the markdowns strategy. So the fashion company now expects sales to fall up to 90% to 840 million euros ($983m), compared to the slight decline it had previously forecasted. On the stock market, the brand’s shares fell more than 10% to its lowest level since November 2016.

Additionally, the company lowered the guidance for the Ebitda margin to a range of 7.5% to 8.5%. It had previously expected it to be 10%. Last year, the Ebitda margin was 9%. The Bonita brand has been put under review, it added.

But analysts showed a mix reaction to the announcement. Volker Bosse of the Baader Bank thinks it was rather disappointing after management had showed optimism at the beginning of August. Strong momentum in the online channel and the launch of new distribution partners should have offset the difficult trading conditions in the third quarter. However, Joerg Philipp Frey, analyst at Warburg, still considers the company’s share price to be very attractive. Frey confirmed his buy recommendation, but lowered the earnings estimate.

Tom Tailor’s prospects are also clouded by a delayed start to the Autumn/Winter season. The high temperatures at the end of September impacted sales of the winter collection.

Tom Tailor’s woes are shared by rival Gerry Weber and online retailer Zalando, who have also lowered their forecasts due to the warm weather. Bucking the trend is Swedish clothing chain H&M, which was able to hold its ground. Thanks in part to off-price sales, revenues rose and exceeded analyst expectations.