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Greek Deal Boosts Luxury Stocks

In its first day of trading on the Milan Stock Exchange, Salvatore Ferragamo SpA gained 10.6 percent to 9.95 euros, or $14.23 at current exchange.

From left: Ferruccio, Leonardo, Wanda and Giovanna Ferragamo; 
Diego di San Giuliano, and Fulvia and Massimo Ferragamo.

Salvatore Ferragamo SpA couldn’t have timed its first day of trading on the Milan Stock Exchange much better.

This story first appeared in the June 30, 2011 issue of WWD.  Subscribe Today.


Shares of the Florence-based fashion house closed with a flourish Wednesday, gaining 10.6 percent to 9.95 euros, or $14.23 at current exchange, reflecting both confidence in the luxury sector and the strength of equities throughout Europe as the Greek parliament approved a sweeping austerity program including spending cuts and tax increases. The vote in Athens significantly improved the likelihood of a rescue package from the European Union and allayed fears that the country could default, a source of discomfort throughout global equity markets all week.

Ferragamo’s strong showing helped to bolster other publicly held European luxury brands. In London, Burberry Group plc gained 5.2 percent to close at 14.49 pounds, or $23.20 at current exchange. In Milan, Tod’s SpA shares rose 2.4 percent to 90.35 euros, or $129.30, and Luxottica Group SpA shares rose 3.2 percent to 21.86 euros, or $31.28. In Paris, PPR SA kicked up 3.1 percent to 122.10 euros, or $176.09.

Also gaining, although less vigorously, were LMVH Moët Hennessy Louis Vuitton SA, up 1.6 percent to 122.50 euros, or $176.66, and Hermès International, up 1.5 percent to 200 euros, or $288.43. Bulgari SpA inched up 0.1 percent to 12.17 euros, or $17.41.

European markets have been tied closely to the up-and-down developments in Athens and appeared to exhale over news of the Greek austerity package. London’s FTSE 100 rose 89.07 points, or 1.5 percent, to 5,855.95, while in Paris the CAC 40 climbed 72.34 points, or 1.9 percent, to 3,924.23 and in Frankfurt the DAX jumped 123.71, or 1.7 percent, to 7,294. Madrid’s IBEX 35 rose 206.9 points, or 2.1 percent, to 10,143.60, and Milan’s index, FTSE Mib, closed up 396.91 points, or 2 percent, at 19,851.59. In Asia, the Nikkei 225 in Tokyo closed up 148.28 points, or 1.5 percent, to 9,797.26, while the Hang Seng Index in Hong Kong declined 0.60 points, or essentially unchanged, to 22,061.18. Shares of Prada SpA were unchanged at 45.50 Hong Kong dollars, or $5.84 at current exchange.

But the good fortune enjoyed by luxury issues Wednesday wasn’t widespread. U.S. stocks got a bump from the news out of Athens in the morning, but pared gains as the day went on, with the S&P Retail Index and all three major indices closing below their highs for the day. The retail index rose 0.46 points, or 0.1 percent, to 527.08, while the Dow Jones Industrial Average ended the day at 12,261.42, up 72.73 points, or 0.6 percent. The S&P 500 managed a 10.74 point, or 0.8 percent, increase to 1,307.41. Shares of Polo Ralph Lauren Corp. were up $1.33, or 1 percent, to $131.03.

In London, Britain’s high street stocks did not fare well, with French Connection Group, Marks and Spencer Group plc and Next plc all falling despite the hopeful news from Athens.

The high street has this week lost some of its major players to bankruptcy, including Habitat, chocolate maker Thorntons and the mass market women’s retailer Jane Norman.

“It’s a bloodbath on the high street,” said Emmanuel Hembert, principal at A.T. Kearney, the global strategy consultancy.

“Economic fundamentals remain weak and are suffocating consumer spending. Fuel rises, commodity prices, tax increases and public sector cutbacks are squeezing the consumer wallet. Retailers are eating each other’s lunch,” he added.

“The Greek vote will not have impacted U.K. consumers either way,” said Kate Calvert, retail analyst at Seymour Pierce in London. “Today’s vote is very much about Greece — it is their issue. Consumers here are concerned about their own jobs and their falling household income.”

But those pressures aren’t being felt nearly as much by the affluent in the U.K. or elsewhere, paving the way for the dual luxe initial public offerings over the past 10 days by two major Italian brands.

Ferragamo made its debut on the Milan Stock Exchange in a stirring opening ceremony at the Bourse, attended by 25 family members and more than 100 employees from Florence and Milan.

“I am very moved. This seemed an unreachable target and it’s a fantastic day that fills us with satisfaction,” said chairman Ferruccio Ferragamo, who was flanked by his mother, Wanda Ferragamo, emotional as she remembered her husband, Salvatore, and was greeted by a standing ovation.

Ferruccio Ferragamo said the path to the IPO was “beautiful, but difficult and demanding as each day we faced falling markets,” but said the company saw “rewarding multiples” at the end of the book building.

Salvatore Ferragamo last week priced its IPO in the midrange of its price guidance, setting each share at 9 euros, or $13 at current exchange, in a flotation that values the company at 1.5 billion euros, or $2.1 billion.

The Florence-based luxury house was offering shares ranging from 8 euros to 10.50 euros, or $11.50 to $15.10. Ferragamo floated about 25 percent of its stock in a deal worth 379 million euros, or $545.2 million. The offer, according to the company, was oversubscribed by 3.6 times, with demand coming from diversified investors worldwide.

Armando Branchini, vice president of luxury goods consultancy Intercorporate, said Ferragamo’s strong debut and Prada’s IPO at the start of the week in Hong Kong are “excellent signs and confirm that the multiples expected in luxury are higher than in other publicly listed sectors.” Despite the fact that financial markets are not surging, Ferragamo’s first day of trading shows how the luxury segment is thriving, he said.

A luxury goods analyst who requested anonymity said the price fixed for Ferragamo’s IPO was “fair” and issued a “neutral” rating for the stock.

With the IPO now completed, Ferragamo Finanziaria, controlled by the family, holds 56 percent of the firm, and various members of the family and Hong Kong entrepreneur Peter Woo will own 11 percent and 8 percent, respectively. There will be no capital increase for the listing.