Tom Tailor launches cost reduction and efficiency drive

16 Nov '15
3 min read

Hamburg-based Tom Tailor Group has initiated its comprehensive, multi-year cost reduction and efficiency programme “Core” to focus on its core competencies, it said in a press release. With this initiative, the company is addressing the far-reaching and rapid structural transformation of the textile industry. The goal is to increase efficiency and accelerate processes while improving the cost base in order to enhance the company's long-term competitiveness.

"The effects of globalization and digitalization have brought far-reaching changes to the textile market, and customer needs are rapidly shifting. Dynamism, efficiency and flexibility will be even more crucial to competitiveness in the future. With our envisaged program we will speed up our processes and streamline our structures. This will further boost the performance potential of our retail and partner spaces," said Dieter Holzer, the CEO of Tom Tailor Holding AG.

The “Core” programme is intended to generate additional contributions to earnings. The company expects to realize the full financial impact of the cost reduction measures, amounting to at least 10 million euro per year, from 2018 onward.

Within the framework of the cost reduction and efficiency program, the Group plans to pare back its brand portfolio, and in the future focus on the strong core brands Tom Tailor, Tom Tailor Denim and Bonita. Consequently, the Tom Tailor Polo Team brand and the Tom Tailor Contemporary Men line are scheduled to be withdrawn from the market in the summer of 2016.

The Tom Tailor group also intends to streamline its sales organization in terms of countries and sales channels. The company plans to further optimize its retail network by closing less profitable stores. Against this backdrop, it will also adjust its rate of expansion. In 2016, up to 30 new stores are scheduled to be opened, as compared with 115 openings in 2015.

Another proposed measure of the “Core” programme is a review and assessment of all operating costs. As a first step, all material costs will be reviewed and options evaluated to reduce the rental and logistics costs.

In the course of the focusing initiatives, the company's workforce capacity will be reduced, realizing cost savings of EUR four to five million. Following initial soundings and information, there will be discussions with the works council over the next weeks so as to arrive at solutions compatible with social priorities.

"By lowering our break-even-threshold and through the resulting improvement of our earnings potential, we are responding to the increasing volatility in the market. As a result, we are positioning the Tom Tailor Group for sustainable and profitable growth and thus make our company weatherproof," said Holzer. (SH)

Fibre2Fashion News Desk - India

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