Ferragamo Strategies Help Profits, Sales Grow in Half
The company saw its core footwear and leather goods categories post gains and expects the second half of the year to be in line with the first.
MILAN — Salvatore Ferragamo SpA's new strategies set in motion in the second part of 2018 are beginning to show results, as the Florence-based reported an increase in profits and revenues in the first six months of the year.
Despite the market challenges, chief executive officer Micaela Le Divelec
Lemmi on Tuesday told analysts during a conference call that the company will continue to build on its pillars and the actions to enhance the brand and to optimize the processes and the organizational structure. Le Divelec Lemmi was appointed ceo of the company in July 2018.
In the six months ended June 30, net profit, including a minority interest, increased 2.4 percent to 60 million euros, compared with 59 million euros in the first half last year.
Revenues climbed 4.6 percent to 705 million euros, compared with 674 million euros recorded in the same period last year. Sales accelerated in the second quarter, rising 4.9 percent.
The company's main categories showed improvements. Sales of footwear were up 4.1 percent to 297.3 million euros, accounting for 42.2 percent of the total. Handbags and leather accessories rose 6.9 percent to 281 million euros, representing 39.9 percent of the total.
Le Divelec Lemmi hinted at an “acceleration of some programs and additional projects” in the second half but took the time to comment on the launch — also digitally — of the brand's
Box Bag in June. The executive said the company had seen “a positive reaction in different geographies and age ranges. It was well-received and so was the message behind the digital project. The Box Bag will continue at full speed in the second half.” She also spoke of dedicated programs in Mainland China and Asia-Pacific with localized initiatives.
“We know we need to continue to work and be fully concentrated on some products.” In particular, she acknowledged “some time” was needed to consolidate and complete the assortment of women's shoes. “We do not expect a boost with the fall season,” she admitted. “We need to create new icons.”
In February, Paul Andrew was promoted to the role of creative director of the brand. Guillaume Meilland maintains his role as men's ready-to-wear design director, with the additional responsibility of studio director, coordinating the development of all product categories under Andrew's leadership.
Sales of fragrances rose 7.8 percent to 41.7 million euros, accounting for 5.9 percent of the total, thanks to a strong performance in the second quarter, which at constant exchange was up 50 percent, due to a different timing in the deliveries compared with the same period last year. Le Divelec Lemmi said a new Signorina flanker, called “Ribelle,” will launch between September and October.
Sales of rtw decreased 3.5 percent to 36.2 million euros, accounting for 5.1 percent of the total, but the executive said “the trend was improving in the second quarter.”
In the first half, the retail channel was up 3.6 percent to 441.7 million euros, representing 62.7 percent of the total.
The company counted 661 points of sales, including 397 directly operated stores and 264 third-party operated stores. Likefor-like sales grew 2.3 percent, despite a negative performance of the secondary channel.
The wholesale channel grew 7.4 percent to 254.3 million euros, accounting for 36.1 percent of the total, accelerating in the second quarter, up 8.9 percent, mainly due to a different timing in the deliveries of fragrances.
Chief financial officer Alessandro Corsi said travel retail was “particularly strong in the APAC” area. Japan, Europe and the U.S. saw a slowdown at wholesale, a channel especially dented by the performance of North American department stores, Corsi said. He expects a “positive growth of the channel” by the end of the year.
The Asia-Pacific area was confirmed as the group's top market in terms of revenues, increasing by 8.1 percent to 277.2 million euros, accounting for 39.3 percent of the total.
The company highlighted a 17.4 percent increase in the retail channel in China.
Asked about the July trend, Le Divelec Lemmi said it was positive, except for the political tensions in mainland China. She said it was hard to predict the impact of the Hong Kong protests on the year, but added the company had “started to see the initial impact at the end of June,” and conceded that “the sentiment of mainland Chinese traveling to Hong Kong is [one of] concern.” She also said it was too early to understand where the Chinese could be redirecting their travels.
The Europe, Middle East and Africa region reported a 3 percent increase to 177.6 million euros, accounting for 25.2 percent of the total, with a positive performance in both distribution channels.
North America edged up 0.4 percent to 152.8 million euros, representing 21.7 percent of the total, stable, penalized by lower revenues from rentals, despite the improved performance of the retail channel in the second quarter.
The Japanese market was also stable, with sales of 59 million euros, accounting for 8.4 percent of the total.
Revenues in the Central and South America were up 13.4 percent to 38.3 million euros, representing 5.4 percent of the total.
As of June 30, capital expenditure totaled 25 million euros compared with 32 million euros in the first half last year, mainly channeled into the store network renovations and IT projects, while last year investments were still highly focused on the company's logistic center. The company expects an acceleration in spending in communication in the second half. Corsi said he expected capital expenditures to total around 60 million euros in 2019.
Corsi expects the second half of the year to be in line with the first half and confirmed a 2019 consensus that sees revenues of 1.39 billion euros and earnings before interest, taxes, depreciation and amortization of 200 million euros.