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Ferragamo’s Solid Stock

The company's IPO has been one of the most successful the fashion sector has seen in a long time.

Salvatore Ferragamo SpA made its debut on the Milan Stock Exchange, on June 29, in a stirring ceremony at the Bourse attended by 25 family members and more than 100 employees from Florence and Milan. The company floated about 25 percent of its stock in a deal worth 379 million euros, or $520.4 million, in an effort to develop the organization with continuity and a strong management. The offer was oversubscribed by 3.6 times, with demand coming from diversified investors worldwide. Despite the instability of the markets, the Florence-based house has been maintaining the momentum with shares at press time closing up 21 percent from their debut price of 9 euros, or $12.45.

The brand is steeped in heritage and history, which harks back to the founder’s early and successful connection with Hollywood in the Twenties, and is associated with highly skilled Italian craftsmanship. The Ferragamos’ universe—which includes a restored village on the Tuscan hills and vineyards and hotels in Florence, among other investments—fuels an image of grounded luxury.

WWD Collections caught up with chairman Ferruccio Ferragamo to explore what’s behind the house’s success on the stock market and the longevity of the company.

Why do you think the company’s shares have been keeping up so well despite the challenges of the economy? Do you think the brand is identified with the family and, if so, is it meaningful?


Yes, shares held up even in stormy conditions. Ferragamo is perceived as a healthy, consistent company with strong values that doesn’t hinge on moods or extreme fashions. I believe in the value of families within a company. They are very important, and they help stay the course. However, I think the winning formula is for the family to be part of the board, providing long-term strategies, flanked by managers in charge of daily operations. For the past four years, Ferragamo has been a combination of family and management.

 

As for the relevance of history, ours is an important and beautiful one—but it is history. Customers that go to our stores now buy if our product is updated, valid and competitive. My mother has always said that it’s a daily exam.

 

My father said that he wished he could live seven lives in order to do all that he was dreaming of doing—from shoes to clothes. We’ve realized our father’s dream, expanding it from the 80 pairs of shoes we produced at the time of our father’s death [in 1960]. The attachment to the company is a given for us.

The day of the debut, you said the road show was a “beautiful but difficult path” to take every day, often while markets were sinking.


During the road show, I was surprised by the deep knowledge of the company people had—they were very prepared. Also, they appreciated the fact that our production is Italian, but often remarked on how this meant low margins. I resisted this way of thinking.

 

I found it depressing for Italy that the Made in Italy label would be tantamount to being inconvenient. Production is Italy’s motor, and we have to bring the country back to being competitive. We must work in this sense, attract investors who now tend to turn to Spain or England, for example. We insist on remaining made in Italy, while keeping costs under control. Costs are high here, but Made in Italy is like a second brand. There are markets that especially appreciate Italian production, like Asia, for example. In the U.S., they look more at the brand as a guarantee—there is a different perception.

You said the Bourse seemed “an unreachable target.” Why? How have things changed?


We made it, but it required a lot of work. We started thinking about it about eight years ago, and tapped [ceo] Michele Norsa in 2006 to this end.

 

We are adapting, as everything is more structured, more pragmatic and more formal. Now we have the right tools required by the Bourse to help grow and consolidate the company. We can think ahead and plan the company’s future, beyond the number of heirs [which is about 70]. Ferragamo is stronger, as we used to work more with our heart rather than through numbers.

Do you ever regret the listing, given the market swings that followed? What about listing in Hong Kong instead of Milan?


Even after what happened [with the markets’ instability], I think it was a positive move for us. The Bourse rewards the luxury sector, which is more stable and less sensitive to the highs and lows of the market. And no, it seemed counterintuitive for us to print Bourse certifications in a different language.

Do you think you are setting a bar and an example for other firms?

Yes, I hope it’s a good example. Others have called me for advice. With the Bourse, there is no bluffing.