Moschino Reorganization Weighs On Parent Aeffe’s Q1 Performance
Group executive chairman Massimo Ferretti believes the new course of the brand will bring benefits in the medium term as he seeks a successor to Jeremy Scott.
MILAN — Moschino's reorganization weighed on parent company Aeffe's bottom and top line in the first three months of the year, but group executive chairman Massimo Ferretti expressed his belief in the soundness of the strategy.
While no mention was made in Wednesday's statement about a possible successor to creative director Jeremy Scott, who exited the brand in March after 10 years, when asked, Ferretti said that “the group is carrying forward the process of selection of the next creative director” of Moschino.
“The results of the first quarter of the year are the natural outcome of the strategic reorganization plan launched by Aeffe Group in 2022 and that we are convinced will bring benefits already in the medium term,” said Ferretti. “The rationalization of the Moschino brand's lines and the acquisition of direct control of the brand's distribution of the Chinese market certainly had an effect on the firstquarter results, but we believe that these moves will be instrumental in the growth and development for both the brand and the group.”
Ferretti touted the growth reported by the Alberta Ferretti, Philosophy di Lorenzo Serafini brands and above all by Pollini, which marks its 70th anniversary this year, as well as the positive performance of the Moschino retail network in Asia, which led him to be “confident about the group's future consolidation and growth opportunities starting from 2024.”
The company said it has renewed the agreement with designer, shareholder and executive director Alberta Ferretti, as the board considers her collaboration “as indispensable and strategic for the company.” The renewal of the design contract will span for another three years, until May 15, 2025, for a remuneration of 1 million euros per year. Ferretti is gearing up to show her resort collection in Rimini, Italy, on May 26, paying tribute to legendary director Federico Fellini.
In the three months ended March 31, Aeffe posted a loss of 300,000 euros compared with a net profit of 8.9 million euros in the same period in 2022.
Revenues amounted to 93.2 million euros, decreasing 8.2 percent compared with 101.6 million euros in 2022.
At the end of trading, Aeffe shares fell 6.18 percent to 1.27 euros.
Sales of the ready-wear division amounted to 58.3 million euros, recording a decrease of 14 percent at constant exchange rates compared to 2022.
Revenues of the footwear and leather goods division are in line with the previous year both at constant and current exchange rates, and amounted to 46.1 million euros.
Margins in the quarter decreased as a result of the new strategic course of the Moschino brand with the associated costs both relating to the change of distribution model in China, from wholesale to retail, and the launch of the repositioning plan for the various Moschino collections, with consequent effects both in terms of turnover and royalties.
In 2021, Aeffe took control of Moschino's distribution in mainland China, signaling the increasing relevance of that market for the label. This involved around 20 stores, which had been operated for the previous 10 years by Scienward Fashion and Luxury (Shanghai) Co. Ltd.
Shortly after Scott's exit, general manager Stefano Secchi also left his role after four years. Aeffe executive Goffredo Palmerini is providing managerial and operational continuity at Moschino.
In the first quarter, adjusted earnings before interest, taxes, depreciation and amortization, net of the effects associated with the group's organizational restructuring, fell 39.7 percent to 12.3 million euros.
Adjusted operating profit amounted to 4 million euros compared to 14.2 million euros in 2022.
In the period, sales in Italy amounted to 42.7 million euros, representing 45.9 percent of the total, and were in line with the same period in 2022. The wholesale channel was down 4 percent, offset by a 35 percent increase in the retail channel.
Revenues in Europe decreased 13.1 percent to 27.4 million euros, accounting for 29.4 percent of the total. Retail showed an 11 percent decrease, mainly linked to the closure of the Moschino boutique in London for a renovation completed in March.
In Asia and the Rest of the World area, sales amounted to 17.5 million euros, edging down 0.3 percent and representing 18.8 percent of the total.
The change of distribution in Greater China is gradually stabilizing, with performance growing in particular in March, said the company.
Revenues in the U.S. fell 42.9 percent to 5.5 million euros.
Wholesale revenues decreased
14.3 percent to 66.9 million euros, representing 71.8 percent of the total.
The retail channel rose 22.5 percent to 23.9 million euros, with solid growth in Italy, up 35 percent, and in Asia, rocketing 91 percent, thanks to the change in the distribution model in China.
Royalties decreased 33 percent to 2.3 million euros.
As reported, in 2022 Aeffe revenues amounted to 352 million euros, up 8.4 percent compared to 325 million euros in 2021. While the group does not break down sales by brand, sources say Moschino represents 70 percent of the total.
Moschino was founded by Franco Moschino in 1983 and Aeffe has held the license for the production and distribution of the brand's women's and men's collections since then.
Following the designer's death in
1994, Aeffe acquired a 70 percent stake in the company, further developing the brand globally. Aeffe took full control of Moschino in 2021, paying 66.6 million euros for the 30 percent stake in the brand it didn't own. It also acquired the license to produce and distribute the Love Moschino collections of women's apparel in-house for 3.6 million euros.
Debt, including the IFRS 16 effect, stood at 245.8 million euros, compared with 231.8 million euros at the end of
2022. Net debt excluding the IFRS 16 effect amounted to 142.4 million euros, compared with 126.9 million euros at the end of December 2022. Aeffe underscored that in the last two years, it has made two strategic investments for a total consideration of 90 million euros relating to the purchase of the minority shareholding of 30 percent of Moschino SpA and the change of distribution in
China on the Moschino brand.