By Francesca Landini
MILAN (Reuters) - Italian clothing groups Stefanel and OVS face an urgent quest to convince investors that they can overhaul their business models after trading disappointments.
Stefanel, the higher-end brand, has to present an Italian court with a restructuring plan to gain protection from its creditors, while OVS is in talks with its banks in an effort to gain more flexibility on its debt repayments.
Both companies, which have been fighting for years to establish their position on the high-street where they have to compete with larger and faster group including Zara's Inditex (MC:ITX) and H&M, have promised a business revamp.
Fashion companies as a whole are having to adapt their collections, moving away from the traditional two season a year pace, as younger clients demand new items more often, social media requests higher innovation and weather patterns change.
An exceptionally mild autumn in Europe has hit many fashion retailers, including low-cost clothing group OVS, whose shares dropped by more than a third on Thursday after it issued a profit warning on Wednesday.
Stefanel shares fell by five percent after it said on Thursday it had filed for a credit protection scheme, adding that it would launch a corporate restructuring.
OVS, which was listed in 2015 after being spun off from retailer Coin, had reported on Wednesday a 11 percent fall in like-for-like sales in the period between August and October.
This echoed a profit warning issued by British fashion retailer Superdry, which blamed unusually warm weather for hitting sales of winter jackets and sweaters.
OVS said it would not be able to recover the performance lost in the third quarter by the end of the year and CEO Stefano Beraldo told analysts that it would continue to suffer in 2019 as it cut prices to get rid of excess stock.
"(We must) shorten the lead time, to buy later and to buy better ... because the market is very difficult to predict," Beraldo told analysts at a conference call after the results.
Analysts were cautious on the OVS saying that it would take time to regain investors' confidence.
"A stock re-rating is strongly tied to a good delivery, while to restore investors' confidence which was dented once again with this reporting season will take time," brokerage Banca IMI (LON:IMI) said in a report for clients.
Meanwhile, Stefanel said it wanted to switch from a seasonal business model based on two collections a year to one that would allow it to refresh items for sale much more frequently.
OVS had net debt of 440 million euros at the end of October, more than four times its core earnings. At the same date Stefanel reported net debt of 62.5 million euros and net equity of 7.5 million euros.