MILAN — Gains in all geographic markets, led by China, and the performance of its handbags, leather and footwear categories helped Salvatore Ferragamo SpA boost net profits by 41 percent in the first nine months of the year.
This story first appeared in the November 15, 2013 issue of WWD. Subscribe Today.
Net profits rose to 120 million euros, or $157.2 million, including 7 million euros, or $9.2 million, of minority interest. This compares with a net profit of 85 million euros, or $108.8 million, in the same period last year.
Revenues grew 10 percent to 915 million euros, or $1.19 billion, compared with 833 million euros, or $1.06 billion, last year.
Dollar amounts have been converted at average exchange rates for the periods to which they refer.
Sales in Europe rose 11.5 percent to 246.7 million euros, or $323.1 million, accounting for 27 percent of the total, boosted by tourist flows, said chief executive officer Michele Norsa during a conference call with analysts. He noted “a constant increase in average ticket in the U.S. and Europe boosted by newcomers such as Africans, Russians and Arabs.”
North America grew 13.8 percent to 204.5 million euros, or $267.9 million, accounting for 22.4 percent of sales. “The U.S. keeps being strong, and we are positive over the next months,” said Norsa
The Asia-Pacific area remained the group’s engine, growing 13.6 percent to 337.5 million euros, or $442.1 million, accounting for 36.9 percent of the total. The retail channel in China was “a major contribution,” recording revenue growth of more than 20 percent.
“Traffic to Hong Kong, Macau and Singapore was extremely strong, and the increase of visas to the U.S. and Europe” also helped boost sales to Chinese tourists, Norsa said.
Norsa said growth is coming “more from second- and third- tier cities where the company’s exposure has even increased,” acknowledging “softness in Shanghai and Beijing,” and pointing to “even bigger growth from western China.” He concluded that “a presence in a large number of cities is winning versus competitors that are [primarily] in big cities.”
Japan showed a 13.3 percent decrease at current exchange, but grew 1.7 percent at constant exchange. “Consumer confidence in Japan has improved and will even more over the next few months,” he said. Ferragamo increased prices “close to double digits” in Japan “to recover the devaluation of the yen,” Norsa added. The company is also hiking prices by midsingle digits in Europe and in U.S. dollar-based countries, as well as in Australia, India and Brazil to compensate for the devaluation of currencies.
In the first nine months, Central and South America gained 14.1 percent.
Globally, the retail channel grew 8.2 percent to 576.1 million euros, or $754.7 million, accounting for 63 percent of sales. Wholesale grew 12.7 percent and accounted for 35.3 percent of the total. “In the U.S., retail was bigger in the third quarter compared with wholesale,” noted Norsa.
By product category, footwear rose 9.6 percent to 399.2 million euros, or $523 million; handbags and leather accessories rose 16.2 percent to 300.3 million euros, or $393.3 million; fragrances climbed 9.7 percent, and apparel dropped 4.2 percent.
The company said “the business trend, recorded in the first nine months of the current year, justifies expectations for growth also throughout 2013 both for revenue and net profit, in the absence of severely unfavorable market conditions.” Norsa said Ferragamo had seen “consistent growth in the nine months” and that he expected the same for next month, after describing October as “a good month.”