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Ferragamo Cutting Prices to Boost Japan Sales

Salvatore Ferragamo SpA is hoping to jump-start stagnant sales in Japan by cutting the retail prices of some pre-fall and fall-winter items by an average of...

TOKYO — Salvatore Ferragamo SpA is hoping to jump-start stagnant sales in Japan by cutting the retail prices of some pre-fall and fall-winter items by an average of 10 percent.

“We would like to be close to our loyal Japanese customers so we make an effort,” Ferragamo chief executive officer Michele Norsa told WWD in an interview, adding that the company’s first-quarter sales in Japan were basically flat. He said Ferragamo may opt for more price cuts in the pre-spring selling season.

“When the market is not easy, I think you should try to generate more traffic, attract more customers,” Norsa said.

Japan is not the only challenge Ferragamo is facing. The family owned company, like Prada, is expected to go public soon although current market conditions are far from favorable. Norsa declined to say whether or not an initial public offering will occur this year, as expected, and declined to elaborate on timing.

“We’ve not established any date,” he said. “We have not [made] any decision yet and it’s not my decision. It’s the shareholders’ decision.”

Luxury goods makers are usually loathe to disclose any form of discounting, but there are signs that mentality is changing as the Japanese market stagnates and the strength of the euro makes European goods more expensive for shoppers. Gucci has lowered retail prices here in “some categories,” said a spokeswoman, who declined to provide details. Louis Vuitton, meanwhile, has acknowledged courting consumers with its less expensive range of Neverfull tote bags, but said it does not plan markdowns.

Prada and Giorgio Armani also said they have no plans to cut prices in Japan.

Norsa, who was in Tokyo recently to announce Ferragamo’s new pricing structure and get an update on the Japanese market, said the Italian company is offering markdowns on selected merchandise.

Those items include five styles each of women’s handbags, women’s shoes and men’s shoes, a combination of pieces from the pre-fall and fall-winter collections, a spokeswoman said. For example, a women’s tote bag will be marked down 11.8 percent to 75,000 yen, or $711, from an original price tag of 85,000 yen, or $806. The cost of a pair of women’s driving shoes will be cut 3.3 percent to 58,000 yen, or $550, from 60,000 yen, or $569.

Ferragamo plans to keep its Japanese prices stable for pre-spring, but “may have some space for further reductions,” Norsa said, adding that the Japanese market is profitable, so the company can afford to offer discounts.

Japan is Ferragamo’s second-biggest market after the U.S., generating about 20 percent of its annual sales. In 2007, Ferragamo’s consolidated sales rose 6.5 percent to 687.4 million euros, or $941.1 million.

“We have the opportunity to hedge quite nicely on the Japanese yen so we can guarantee we will not increase pricing,” Norsa said.