The CEO of Ecco said the family-owned Danish shoemaker was able to increase operating margins in 2013 despite rapidly growing leather and labor costs and production constraints related to a fire a 2011 fire that destroyed its factory in Thailand.
Ecco revenue reached €1.13 billion in 2013, up €47.9m, or 4.4 percent, from 2012, according to unaudited results disclosed by the company Wednesday via a press release. The release said profit before taxes rose 8 percent to €165.4 million, or 14.6 percent of revenue, up from 14.1 percent in 2012. Net income reached €106.4m, an increase of 15.8 percent compared to 2012.
Ecco lowered expenses to €45.7 million from the exceptionally high level of €79.6m in 2012, despite higher spending on marketing. The company valued its shareholder equity at €461.6 million at year end, up from €418.4 million a year earlier. Return on equity increased from 22.6 percent to 24.2 percent.
New products and stores, emerging markets and and e-commerce sales drive growth
Kasprzak said a significant number of new products drove growth, including the special anniversary shoe, Ecco Mind, which sold out very quickly. Ecco also opened 255 new shops and shop-in-shops during the year, bringing the total number of Ecco shops and shop-in-shops in Europe, Asia, and North America to 2,989. In addition, more than 300 shops were upgraded and refitted during 2013. Ecco sells in 87 countries at 2,989 Ecco shops and shop-in-shops and a total of 15,000 sales points around the world. Sales to China, Russia and via the company's e-commerce sites all grew significantly during the year, according to the company's press release. Ecco, which also operates leather tannieres, reported sales of leather to manufacturers of other premium and luxury brands surged 58 percent to €82 million during the year. Sales of leather goods and shoe accessories continued their positive trend, growing by 12.6 percent to €38m.
Rapidly rising leather and labor rates
After its Thai factory was flooded in 2011, Ecco decided to change its factories, so no factory represented more than 20 percent of total capacity. This required relocating 35 percent of the company's production machinery and closely monitoring growth against available capacity.
"It's a very pleasing performance," said Kasprzak. "We have been successful in reorganising our production footprint, whilst growing our business and pro-fits."
The more moderate growth rates, and very high product cost increases caused by soaring leather prices and fast-growing production wages, also required a tight focus on efficiencies, and on selling higher value products.
"We were successful in executing this during the year, and the operating margin improved from 15.0 percent to 16.2 percent, which is satisfactory," said Ecco CFO Steen Borgholm. "Controlled growth has been the key to Ecco's success in 2013 and we will continue this strategy in 2014."
Borgholm said the company does expect to increase its sales and profit-ability this year.
Founded in 1963, Ecco is one of the only vertically integrated global footwear companies in the world that still manufactures all its shoes in-house and operates its own tanneries. The company employes 18,500 employees.
