MILAN — The effects of the coronavirus pandemic hurt Aeffe SpA’s bottom and top lines in the first nine months of the year but the Italian group saw signs of recovery in the third quarter.
In the nine months ended Sept. 30, the adjusted net loss, net of non-recurring costs of 5.1 million euros, totaled 7.4 million euros, compared with a profit of 13.2 million euros in the same period last year.
Revenues fell 23.2 percent to 206.8 million euros, compared with 269 million euros in the first nine months of 2019.
Aeffe, which controls the Alberta Ferretti, Moschino, Philosophy di Lorenzo Serafini and Pollini brands, said adjusted earnings before interest, taxes, depreciation and amortization decreased 73.5 percent to 12.2 million euros, net of an extraordinary writedown of raw materials inventories of 4 million euros due to the COVID-19 pandemic, compared with 46.1 million euros in the same period last year.
“In a market characterized by a generalized contraction in consumption and a prudent stance, we positively evaluate the improving trend of the business in the third quarter of the year, which, along with the benefits of the actions taken to support the economic and financial soundness of the group, is reflected in the results of the first nine months,” said executive chairman Massimo Ferretti. “Thanks to the reputation of our brands and the concrete investment plan implemented in the areas of digital marketing with the development of a ‘virtual showroom’ and the strengthening of e-commerce, the order collection for the next spring/summer 2021 collections registered a trend above expectations, albeit with a negative balance. Despite the context remaining uncertain and challenging, we are confident that the strategy adopted will be able to create solid foundations with a medium- to long-term horizon.”
In the nine months, revenues of the ready-to-wear division amounted to 151.7 million euros, falling 24.4 percent, while revenues of the footwear and leather goods division decreased by 15.4 percent to 81.9 million euros.
In the third quarter of the year the group saw a strong recovery in revenues, mainly as a result of shipments of the fall 2020 collections, which were postponed beyond the end of the first half due to the difficult international market context and lockdown measures.
Aeffe touted “significant resilience” of the fall 2020 collections despite the challenging macroeconomic scene. The group has achieved its objective of limiting the overall percentage of returns and discounts on this season’s collections below 10 percent as compared to orders originally collected.
In the nine months, sales in Italy were down 21.8 percent to 97.9 million euros, dented by the sharp decline in tourist flows in both the retail and wholesale channels. The Italian market represented 47.3 percent of the total.
Revenues in Europe decreased 2.1 percent to 61 million euros, contributing to 29.5 percent of the total. In the third quarter, the U.K. and Germany outperformed the average of the area, showing an upward trend compared to the third quarter of 2019.
In Asia and in the Rest of the World area, revenues fell 41.9 percent to 39.2 million euros, representing 19 percent of the total. The Greater China area reported a 41 percent decrease in the period; however, the region recorded in the last quarter positive signs in terms of sales and traffic in the stores, clearly showing a recovery trend.
Sales in America fell 38.3 percent to 8.6 million euros.
The wholesale channel showed a 20.6 percent decrease to 149 million euros, contributing to 72 percent of the total. In the third quarter, the decrease amounted to 6.7 percent at constant exchange rates and with an improvement compared to the first half of the year thanks to the regular shipment of the fall collections.
Sales of directly operated stores were down 29.9 percent to 50.1 million euros, representing 24.3 percent of the total. In the third quarter, sales in the retail channel decreased by 9.4 percent at constant exchange rates, recording a gradual and steady improvement compared to the first semester, despite still being influenced by the limited traffic in shops.
As of Sept. 30, Aeffe counted 60 directly operated stores and 148 franchised stores. During the period, the Moschino stores in Los Angeles and in New York were closed because their locations were no longer considered strategic.
Revenues from royalties decreased by 22.4 percent to 7.6 million euros.
The company outlined strategies that included a focus on strengthening relations with its main commercial partners, especially in the Far East area and on enhancing its digital activities to support the online business and customer care in particular.
Aeffe said it plans to continue to contain costs and renegotiate rents while it will request all possible government grants and subsidies in the countries where the group operates to face the pandemic effects.
Over the first nine months of 2020, the group obtained medium- and long-term unsecured loans for more than 35 million euros, of which 20 million euros was guaranteed by Mediocredito Centrale as part of the Relaunch Decree issued by the Italian State.
As of Sept. 30, net financial debt with IFRS 16 effect stood at 148.7 million euros compared with 149.9 million euros at the end of September last year.