By  on January 25, 2006

MILAN — Salvatore Ferragamo Group reported a 12 percent jump in 2005 sales and forecast double-digit growth for 2006, citing strong momentum in the U.S. and Asia.

Sales rose 12 percent to 575 million euros, or $718.8 million at average exchange rates. Currency impact was minimal — revenue would have increased 11.5 percent at constant exchange rates. Those results exclude the 2004 and 2005 sales at Emanuel Ungaro, which Ferragamo sold last year.

"The growth trend reassures us that [2006] will continue to be positive," chief executive officer Ferruccio Ferragamo said at a news conference. "The trend should continue to strengthen," he said, citing positive December sales in the U.S.

Asked if the family-run company was ready for an initial public offering, Ferragamo said there were no current plans to sell shares. "We appreciate the world of the stock market," he said. "We like to act like a company that is listed on the market."

The news conference was a major step toward transparency for Ferragamo, a company normally reluctant to disclose financial data. But that didn't mean executives were willing to discuss the company's bottom line, other than to say that it is positive.

Last November's move to sell money-losing Ungaro to San Francisco-based entrepreneur Asim Abdullah is likely to boost Ferragamo profits going forward. Ungaro posted a 2004 consolidated loss of 21.4 million euros, or $26.5 million, which affected the results of the Ferragamo family holding companies, according to balance sheets at the Milan Chamber of Commerce.

The company attributed some of the growth to the opening of new stores. Ferragamo's directly operated retail network grew by 12 units last year to 221, including openings in Cannes, France; Washington; Taipei, Taiwan; Vietnam, and China. The company also renovated stores last year in cities including Paris, Hong Kong and London, and men's stores in Milan and Rome. Store openings this year include a boutique at the NorthPark Center mall in Dallas, a unit in Beijing and the expansion of two Hong Kong flagships.

Retail sales through the directly controlled retail U.S. network increased 18 percent, while those in Italy grew 11 percent and sales in France advanced 15 percent. Strong retail sales of bags and leather goods propelled an 11 percent jump in Japan.Directly operated stores account for 68 percent of Ferragamo's revenue while wholesale business comprises 31 percent.

Salvatore Ferragamo and Herve Martin, general manager for products, made references to the importance of communications and marketing strategy.

The company spent 25 percent more on communication last year, and the ceo said expenditures would grow by "one-third" this year. He noted positive feedback from the campaign featuring the slogan "I Love Salvatore," which will continue to be used.

Ferragamo does 21 percent of its business in Europe and 26 percent in the U.S. Japan accounts for 27 percent of the total, while the rest of Asia contributes 23 percent. There are plans to open another five stores in China this year.

"We view China [more] as a market opportunity than as a competitor," Ferragamo said, brushing aside concerns of China's manufacturing challenge to Italy.

In terms of product category, shoes are still the biggest revenue generator, accounting for 38 percent of sales. Bags and other leather goods represented 29 percent of revenue. Ready-to-wear accounted for 16 percent, while ties, foulards and other accessories generated 9 percent.

The company said sales of women's shoes rose 7 percent last year, while leather goods advanced 13 percent.

Martin said the company has growing room in men's apparel and accessories, which account for about one-third of Ferragamo's revenue. "The market for men's wear is important and it's opening up to many more products," he said. "Its share could increase."

Ferragamo also noted that sales of fragrances, which represent 5 percent of group sales, rose 32 percent. A joint venture with Bulgari SpA produces the company's perfumes, and will continue to produce those of Ungaro through a licensing deal.

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