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Salvatore Ferragamo Profits Rise 32%

Sales up 29.8% in quarter.

MILAN — Growth in all geographic markets and in all product categories at both retail and wholesale helped Salvatore Ferragamo SpA post a 32.4 percent increase in net profits in the first half ended June 30 to 45.7 million euros, or $66.2 million, compared with 34.5 million euros, or $42.4 million, in the same period the previous year.

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

The company, which made its debut on the Milan Stock Exchange on June 29, registered a 29.8 percent rise in sales to 459.7 million euros, or $666.5 million. In the first six months, operating profit also surged, showing an 80.4 percent rise to 70.9 million euros, or $102.8 million, compared with 39.3 million euros, or $48.3 million.

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

The company attributed the “excellent growth” to Ferragamo’s successful strategy of focusing on “a very high product quality” and Made in Italy craftsmanship.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 58.8 percent to 83.8 million euros, or $121.5 million.

The Asia-Pacific region remains the group’s main market, with sales of 168.8 million euros, or $244.7 million, up 40.1 percent compared with the same period last year and accounting for 36.7 percent of total revenues. Ferragamo attributed this jump to a more than 50 percent surge in sales in China.

Sales in Europe gained 40.1 percent, helped by strong tourism and the improvement of the company’s distribution structure, accounting for 25.2 percent of sales. North America, while affected by the weakness of the dollar and an uncertain economy, showed 24.2 percent growth, representing 21.1 percent of sales. At constant exchange rates, revenues would have grown 29.8 percent.

Despite the earthquake and subsequent nuclear disaster that hit Japan in March, sales there inched up 1 percent, accounting for 13.2 percent of sales.

Revenues in Central and South America grew 36.6 percent and accounted for 3.8 percent of total sales.

The company’s retail network showed a 23.9 percent gain to 301.8 million euros, or $437.6 million, accounting for 65.7 percent of sales. At the end of June, there were 316 Ferragamo directly operated stores. The wholesale and travel channel rose 46.1 percent to 150.1 million euros, or $217.6 million.

Footwear sales increased 36.9 percent, accounting for 43 percent of total revenues. Ready-to-wear gained 19.4 percent, accounting for 10 percent of sales. Perfumes rose 34.3 percent and handbags and leather accessories, 30.5 percent.

Costs relating to the initial public offering totaled about 5 million euros, or $7.2 million.

As of June 30, net debt stood at 71.6 million euros, or $103.8 million, compared with 18.2 million euros at the end of December 2010. The figure takes into account Ferragamo’s acquisition of shares in Gruppo Imaginex, controlled by Hong Kong businessman Peter Woo, although the deal will not be effective until 2013. It also books a distribution of dividend of 31.4 million euros, or $45.5 million. Stripped of these two entries, debt would stand at 32 million euros, or $46.4 million.

To strengthen the group’s presence in a key area of the luxury business, Ferragamo said earlier this year it was planning to increase its equity interest in the firm’s distribution companies based in Greater China, which will rise to a 75 percent stake from the current 50 percent (60 percent for Macau) in January 2013. The Woo family, who among other interests also own the Lane Crawford Joyce Group, has been a partner of Ferragamo in Greater China for more than 20 years and helped distribute the brand in China, Hong Kong, Taiwan and Macau. Woo holds a 6 percent stake in Ferragamo.

The fashion company sold about 25 percent of its stock in the IPO in a deal worth 379 million euros, or $545.2 million. Ferragamo Finanziaria SpA, which controls Salvatore Ferragamo SpA, holds a 58.24 percent stake in Ferragamo. Chairman Ferruccio Ferragamo explained during the road show in June that “[the Ferragamos are] selling a limited number of shares because the family is very, very interested in the company and wants to continue being involved.”

On Monday, shares closed up 3.82 percent to 11.69 euros, or $16.94.