Difficult market impacts earnings at Wolford

Bregenz, March 18,2009 - Against the backdrop of an extremely challenging business environment and in spite of continuing restrained consumer demand, the Wolford Group achieved sales of EUR 118.5 million in the first nine months of the 2008/09 fiscal year (Q 1-3, 2007/08: EUR 125.0 million).

"In these economically turbulent times, we are focusing on our core business in the Legwear, Ready-to-wear and Lingerie product groups and relying on our strengths as an internationally established fashion brand in the premium segment with high customer loyalty. Furthermore, we are intensifying our efforts to further exploit cost savings potential and optimize monobrand distribution, and will determinedly pursue the strategy we have adopted, enabling us to emerge even stronger from this difficult global economic situation”, commenteds Holger Dahmen, Chief Executive Officer of Wolford AG.

Sales decline - earnings significantly burdened

On balance, total sales of the Wolford Group in the first three quarters of the current fiscal year declined by 5.2 percent in a year-on-year comparison, to EUR 118.5 million. Adjusted for currency effects, the sales decrease totaled only 3.2 percent. This development is based on a disproportionately strong performance in the previous fiscal year (Q 1-3 2007/08: EUR 125.0 million), which in turn had raised sales by 15.9 percent compared to 2006/07.

In addition to the ongoing perceptible consumer restraint, the additional costs relating to newly¬opened retail sales locations during the reporting period and the effects of foreign currency developments negatively impacted earnings indicators. The operating result before depreciation, amortization and impairment (EBITDA) amounted to EUR 10.1 million (Q 1-3 2007/08: EUR 15.8 million), which corresponds to an EBITDA margin of 8.5 percent (Q 1-3 2007/08: 12.7 percent). The operating profit (EBIT) reached a level of EUR 4.7 million, down from EUR 10.7 million in the previous fiscal year. Accordingly, the EBIT margin in the reporting period was 4.0 percent (Q 1-3 2007/08: 8.6 percent). The profit from continuing operations in the first three quarters of the 2008/09 fiscal year amounted to EUR 2.1 million (Q 1-3 2007/08: EUR 9.2 million).

Solid equity base

As at the balance sheet date of January 31, 2009, shareholders' equity of the Wolford Group totalled EUR 79.5 million, above the comparable figure of EUR 78.8 million on January 31, 2008. This corresponds to an equity ratio of 48.6 percent, underlining the Wolford Group's success in maintaining the high level achieved in previous years. Investments rose to EUR 12.4 million in the first nine months of the 2008/09 fiscal year. During the reporting period, Wolford primarily invested in the expansion and optimization of its distribution activities as well as the implementation of new enterprise resource planning (ERP) and development systems designed to optimize processes and capacities and thus sustainably reduce costs.

Varied development in core geographic markets

Considering sales development from a regional perspective, the Wolford Group maintained the high level of sales in most of its core geographic markets in Western Europe. The markets Belgium (+24.6 percent), Switzerland (+9.5 percent in the Group currency, +4.2 percent in CHF) and France (+6.3 percent) developed gratifyingly. In Great Britain, sales climbed 13.2 percent in GBP (-3.7 percent in Group currency). The previous year's sales level could be maintained in Austria, whereas sales dropped in Germany (-2.5 percent) and the Netherlands (-5.5 percent). Consumer restraint was even more perceptible in Scandinavia (-8.0 percent) and in Southern Europe, where sales fell even more significantly, at -9.9 percent in Italy and -15.7 percent in Spain. The USA, which has been particularly affected by the current economic crisis, registered a 16.4 percent drop in sales (-14.1 percent in USD). In contrast, the AsialOceania region reported a 6.4 percent increase in sales.

Slight sales growth at proprietary stores

Wolford says its proprietary stores continued to develop positively in the first nine months of the 2008/09 fiscal year. Wolford-owned boutiques, shop-in-shops and factory outlets increased sales by 2.7 percent year-on-year. Sales at Wolford's own boutiques rose 0.7 percent, whereas Wolford-owned and partner-operated boutiques together saw sales decline by 4.1 percent. Sales generated by department stores and multi-brand retailers were down 6.7 percent and 5.4 percent respectively from the previous year's figures.

Outlook

The Executive Board of the Wolford Group expects the difficult economic conditions to continue in the short to medium term, and to be accompanied by a further weakening in consumer demand. However, the group is prepared to meet the challenges of the future based on the persistent adherence to strategic targets as well as the initiation of process optimization and cost savings measures.

The start-up of the company's own production facility in Slovenia is planned to take place in the 2010/11 fiscal year. This investment will not only lay the groundwork for the further expansion of the brand in the future, but also contribute towards safeguarding the long-term success of the company, Wolford says.