MILAN — Driven by a spike in the Far East, Aeffe SpA reported a 35.1 percent increase in profits in the first nine months of the year. In the period ended Sept. 30, earnings climbed to 16.1 million euros, compared with 11.9 million euros in the same period last year.
Massimo Ferretti, executive chairman of the Italian fashion group, said the performance confirmed “a path of solid and continuous development, thanks to the creation of high quality and distinctive collections.” He admitted the scenario was “challenging also at the macroeconomic level,” but expressed his confidence about the rest of the year. “We expect an increase in sales and a more than proportional growth in profitability for the full 2018. Moreover, the orders’ backlog of the spring 2019 season, which posted a 6 percent increase, contributes to a positive sentiment on the growth over the mid-long term.”
Aeffe, which is listed on the Star segment of the Italian market, controls the Alberta Ferretti brand; Philosophy di Lorenzo Serafini; Moschino, designed by Jeremy Scott, and Pollini, and produces and distributes collections for Cédric Charlier and Jeremy Scott.
In the nine months, earnings before interest, taxes, depreciation and amortization rose 22 percent to 37.1 million euros, compared with 30.4 million euros, driven by a sales growth of both divisions.
Operating profit climbed 28.2 percent to 27.7 million euros, compared with 21.6 million euros last year.
Aeffe revenues rose 12.6 percent to 264.6 million euros, compared with 235 million euros in the same period last year. The ready-to-wear division was up 12.8 percent to 202.9 million euros, while the footwear and leather goods division grew 10.7 percent to 88.6 million euros.
Sales in Italy rose 11.2 percent to 129 million euros, accounting for 48.7 percent of total, thanks to organic growth at both its wholesale and retail channels.
Revenues in Europe, excluding Italy and Russia, grew 9.9 percent to 53.6 million euros, contributing to 20.3 percent of the total, mostly driven by a strong performance in the U.K., Germany, France and Eastern Europe.
Russia was up 1.8 percent to 7.3 million euros, representing 2.8 percent of total.
In the Rest of the World area, revenues climbed 27.4 percent to 61.4 million euros, representing 23.2 percent of total, driven by a 38 percent jump in the Far East. In an interview with WWD, Marcello Tassinari, managing director and chief financial officer, said the performance was mainly to be attributed to Greater China, which continued to show growth in the quarter. “There are also positive signs from the spring collection,” he said, pointing to a double-digit growth.
He touted Moschino’s significant brand awareness in China, which is leading this growth. Tassinari said an Alberta Ferretti boutique opened in Shanghai a year ago. Aeffe is planning dedicated ad campaigns for the region to “speed up the penetration” in the market.
Incidentally, the executive trumpeted the solid performance of the H&M x Moschino collection, which was launched in Italy on Thursday.
In the nine months, the U.S. posted a 9.9 percent decrease in sales to 13.3 million euros, accounting for 5 percent of total. At constant exchange rates, revenues were down 4.4 percent. Tassinari admitted the region was weak, but touted the first signals of a pick-up with the spring/summer 2019 season in mid,single-digit terms. “We are very confident in this market, which we have always presided, and surely we will grow there, too,” Tassinari said.
Wholesale revenues grew 15.8 percent to 190.4 million euros, contributing to 72 percent of consolidated sales.
Sales of directly operated stores rose 3.9 percent to 65.6 million euros, accounting for 24.8 percent of total. Royalties increased 16.4 percent to 8.5 million euros.
No new openings are expected in the last quarter, but Tassinari said two Moschino stores will open in the U.S. in 2019, one in Miami and one in New York.
In the nine months, capital expenditures totaled 5.5 million euros, mostly related to the maintenance and stores’ refurbishment.
As of Sept. 30, net debt stood at 39.1 million euros, compared with 66.1 million euros at the end of September last year, thanks to an improvement in operating cash flow.