Salvatore Ferragamo Profits Up 30%

Global retail and wholesale growth and gains in the footwear and leather goods categories lifted the company's net profit in 2012.

MILAN — Global retail and wholesale growth and gains in footwear and leather goods lifted Salvatore Ferragamo SpA’s net profit 30 percent in 2012 to 106 million euros, or $135.7 million, compared with 81 million euros, or $112.6 million, in the previous year. The Florence-based company also attributed the improvement to a 10 percent reduction in the minority interest last year compared with 2011, as a consequence of the buyback of the stakes in distribution companies in South Korea and Southeast Asia.

This story first appeared in the March 22, 2013 issue of WWD.  Subscribe Today.

Including a minority interest profit of 20 million euros, or $25.6 million, profits rose more than 21 percent to 125 million euros, or $160 million, compared with 103 million euros, or $143.2 million, in 2011.

In the 12 months ended Dec. 31, Ferragamo reported revenues of 1.15 billion euros, or $1.47 billion, up 17 percent compared with 986 million euros, or $1.37 billion, in 2011.

Operating profit climbed 24 percent to 194 million euros, or $248.3 million, compared with 157 million euros, or $218.2 million.

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Dollar figures were converted at average exchange rates for the periods to which they refer.

Chief executive officer Michele Norsa said during a conference call with analysts that, in 2012, “luxury has proven again to be very resilient and the top brands even stronger. The name of the game is the ability to capture new consumers not only at home but around the world.”

The Asia-Pacific area remains the group’s core market, accounting for 36.3 percent of total sales and up 17.5 percent compared with the previous year. The retail channel in the region contributed to the growth, showing a 20 percent jump. Lifted by tourists, Europe posted a 21.4 percent sales increase. North America grew 16.1 percent, almost entirely achieved on a like-for-like basis.


Sales rose 5 percent in Japan, supported by a favorable exchange rate, but fell 2 percent in local currency. The Central and South America region was also strong, showing a 26.9 percent increase.

Norsa said that China in the fourth quarter last year “definitely restarted at a very good pace,” and also remarked on the flow of “hundreds of thousands of Chinese tourists around the world” traveling to countries from Canada to Indonesia.

Norsa said that the Far East, including Taiwan and South Korea, were “weaker than China and Southeast Asia.” He also noted that the U.S. fared better than expected throughout the year and across different regions, despite Hurricane Sandy and some snowfalls. Florida was “very strong, impacted by [traveling] Latin Americans. The U.S. remains a very important market and investments in North American regions will follow in  the current year,” said Norsa.

The executive singled out Mexico, Australia, Southeast Asia, Malaysia and Vietnam, which are “overperforming,” as strong markets in addition to China.

As of Dec. 31, the group had 338 directly operated stores and 268 third-party-operated stores.

In 2012, retail sales grew 14 percent to 753 million euros, or $963.8 million.

The wholesale and travel retail channel gained 22 percent, reaching 381 million euros, or $487.7 million.

Asked about 2013, Norsa said he’d “seen growth” so far at both retail and wholesale, although the Chinese New Year took place 20 days later than in 2011. “There is a good mood in Japan, and still a positive business in the U.S.,” said Norsa. “The business trends, recorded in the first months of the current year, justify expectations for growth also throughout 2013,” both in terms of revenues and net profit, “in the absence of severely unfavorable market conditions,” he said.

In 2012, capital expenditures were up 41 percent to 59 million euros, or $75.5 million, mainly due to the enlargement and refurbishment of some key locations, new stores openings, logistics enhancements and digital projects. Key store renovations in New York, Munich, Seoul, London, Vancouver and Cannes, France, were completed in 2012, in addition to the opening of 15 directly operated stores, and more than 10 major projects are planned for 2013.

As of Dec. 31, net debt stood at 58 million euros, or $74.2 million, compared with 29 million euros, or $40.3 million, at the end of December 2011. This takes into account Ferragamo’s acquisition of shares in Imaginex Group, controlled by Hong Kong businessman Peter Woo — a financial debt of 44.8 million euros, or $57.8 million, effective in January 2013, of a further stake in the Greater China subsidiaries and the cash-out (about 19 million euros, or $24.3 million) for the buyback, from the Trinity Group, of a further stake in the subsidiaries of South Korea and Southeast Asia.

The group also said it has signed an agreement to dispose of its stake in ZeFer to the Ermenegildo Zegna Group. ZeFer is the jointly controlled company for the production of shoes and leather goods under the Zegna brand, which was established in 2002.

The deal, which will be effective on April 15, includes, in addition to 2012 dividends, a payment of 13.8 million euros, or $17.6 million. Ferragamo will continue to provide advisory services to ZeFer for 2013.

“It was no longer strategic for us,” Norsa said of the deal, without excluding future potential collaboration.