By  on May 13, 2014

MILAN — A revamped business strategy, a reorganization of its licenses and a new design direction at a number of its brands drove Aeffe SpA’s net profit up 60 percent in the first three months of the year. In the period ended March 31, the bottom line climbed to 3.2 million euros, or $4.4 million, compared with 2 million euros, or $2.6 million, in the first quarter last year.

Dented by the end of the Jean Paul Gaultier and Cacharel licenses, and a reorganization of its distribution in Japan, revenues dropped 7.4 percent to 67.6 million euros, or $92.6 million, compared with 73 million euros, or $96.3 million, in the same period last year. Net of these effects, sales would have grown 3.7 percent at constant exchange rate.

Dollar amounts are converted at average exchange for the periods to which they refer.

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Aeffe controls the Alberta Ferretti, Moschino and Pollini brands, and produces and distributes collections for brands including Emanuel Ungaro and Cédric Charlier.

Revenues of the ready-to-wear division totaled 52.7 million euros, or $72.2 million, down 7.4 percent at current exchange rates. The footwear and leather goods division decreased 2.3 percent, totaling 19.8 million euros, or $27.1 million.

“We are satisfied with the results achieved by the group, which records a new boost in profitability. The commitment and the prompt response to a new market scenario, which led to the refocusing of certain aspects of the business strategies — the reorganization of the licenses’ portfolio, the stylistic renewal of some brands and the strengthening of the distribution channels — have already registered positive results in the first three months of the year,” said Massimo Ferretti, executive chairman of Aeffe. “Therefore, we are confident for the future, also encouraged by a 10 percent increase in orders backlog for the next autumn-winter collections.”

During a conference call with analysts, Marcello Tassinari, managing director and chief financial officer, said that “analyzing prospects for spring-summer 2015, although data is not certain yet, growth should be superior to that of fall-winter.  We are reaping the rewards of the strategies implemented, such as a renovation of our pool of licenses and the hiring of new creative directors at some brands.” Pressed by an analyst, he said it was “too early to forecast a double-digit growth for the year,” but said he could be “cautiously optimistic for a growth in sales and margins in 2014.”

For fall, he said the Alberta Ferretti and Moschino brands grew “above the average 10 percent,” while Philosophy’s performance “was negative compared with the other brands.” Without elaborating, he said the company was “taking action” to fine-tune and improve the brand’s performance. “We hired Natalie Ratabesi to raise the positioning of the brand and to have its own autonomy. There are changes taking place,” he noted cryptically.

Tassinari touted the arrival of new creative director Jeremy Scott at Moschino, which “is showing a growth above average.” He said the designer has added strength to the brand, which is now targeting a younger customer. “There are good prospects. If we were to consolidate the brand’s licenses, sales last year would have totaled 220 million euros and we could expect sales of 240 million euros in 2014,” he said.

In the first quarter, group sales overall in Italy decreased 1.2 percent to 28.9 million euros, or $39.5 million, accounting for 43 percent of total revenues.

Europe showed a recovery as revenues rose 14.1 percent to almost 17 million euros, or $23.3 million, representing 25 percent of the total.

Russia was down 10.6 percent to 5.1 million euros, or $7 million, due to the end of the licenses mentioned. For the same reason, sales in the U.S. dropped 22.2 percent and accounted for 5 percent of total.

Sales in Japan decreased 78.2 percent, contributing to 2 percent of consolidated sales, due to the reorganization of local distribution, effective from the beginning of 2014. Specifically, Aeffe and Moschino SpA have signed a distribution and franchise agreement with Woollen Co. Ltd. and Mitsubishi Corporation Fashion Co. Ltd., under which Woollen Co. Ltd. has become the exclusive distributor for the whole territory of Japan. Accordingly, sales in the market are now exclusively wholesale and no longer retail.

The Rest of the World decreased 2.7 percent and accounted for 17 percent of the total.

In the first quarter, capital expenditure totaled 1.3 million euros, or $1.7 million, mainly related to the maintenance and refurbishment of stores; disinvestments amounted to 2.7 million euros, or $3.7 million, mainly resulting from the sale of the Alberta Ferretti store in Paris in Rue Saint-Honorè. Tassinari said a new Alberta Ferretti store will open in “a more prestigious” location in that same Parisian street. A Moschino Love boutique opened in March and a company outlet will open in Tuscany this year, as well as 10 new franchised stores in China and Asia.

Last week, Aeffe denied speculation that it might change hands, following a series of jumps in the price of its shares on the Milan Stock Exchange.

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