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MILAN — Salvatore Ferragamo SpA saw net profits more than double in the first quarter, driven by a solid performance worldwide and continued growth in its core footwear and leather goods categories.
This story first appeared in the May 14, 2013 issue of WWD. Subscribe Today.
In the three months ended March 31, the Florence-based fashion house reported net profits of 24.3 million euros, or $32 million, compared with 12 million euros, or $15.7 million, in the same period last year. Including minority interests of 2 million euros, or $2.6 million, as a consequence of the buy-back of stakes in the distribution companies in Greater China, Korea and South East Asia, profits rose 57 percent to 27 million euros, or $35.6 million, compared with 17 million euros, or $22.2 million, in the same period last year.
Revenues increased 9 percent to 282 million euros, or $372.2 million, compared with 260 million euros, or $340.6 million, in the first quarter of last year.
The Asia-Pacific area continued to be the group’s main market, accounting for 36 percent of sales, and totaling 102 million euros, or $134.6 million, up 6 percent compared with the same period last year. A major contribution came once again from the retail channel in China, which posted 20 percent growth.
“China is still growing, in a different way. Second- and third-tier cities are showing stronger growth through local shoppers and travelers from other regions in the country,” said chief executive officer Michele Norsa in a conference call with analysts. “Hong Kong, Macao and Australia are over-performing, while Korea and Singapore are showing a mixed performance.”
Sales increased 19 percent in North America and more than 13 percent in Central and South America.
“We are doing business in a mixed scenario, with an uncertain political situation in Southern Europe, and the U.S. and Japan uneven from one month to the next, but the luxury market is showing resilience,” said Norsa. “We definitely see a general slowdown, especially versus very strong quarters in the past.” However, Norsa touted the U.S. and Latin American markets as “overperforming,” and cited the fact that, in Brazil, the company bought back three retail stores and distribution.
International tourists helped lift sales in Europe by 10 percent. Norsa said there is “still good traffic” in Europe, “sustained by travelers, who are still increasing at a 4 to 5 percent rate.”
Norsa also cited future developments in travel retail through hefty investments by airlines in new airports in China, Thailand, Dubai, Indonesia and Istanbul.
The unfavorable impact of fluctuations of the Japanese yen versus the euro contributed to an 8 percent decrease in sales in Japan. At constant exchange, sales would have been up 4 percent in that country.
At the end of March, Ferragamo had 339 directly operated stores, while the wholesale and travel retail channel included 261 third-party operated stores, as well as a presence in department stores and high-level multibrand specialty stores.
The group’s footwear category grew 8 percent, and handbags and leather accessories rose 13 percent, together accounting for more than 74 percent of total sales. “Small leather goods showed a very good contribution to profitability,” said Norsa. Fragrances rose 14 percent.
Operating costs grew 3 percent, reaching 136 million euros, or $179.5 million.
Investments rose 20 percent to 10 million euros, or $13.2 million, mainly driven by new stores and the enlargement and refurbishment of existing key locations.
As of March 31, net debt stood at 33 million euros, or $43.5 million, compared with 22 million euros, or $28.8 million, at the end of March of last year, as a consequence of the purchase of the minority stakes in Asia.