MILAN — Marco Gobbetti has full confidence in Maximilian Davis’ design skills as he leads the Ferragamo turnaround.
During a conference call with analysts on Tuesday evening to discuss the performance of the luxury brand during the first nine months of the year, which saw a 17.2 percent increase in revenues, the chief executive officer and general manager touted the success of Davis’ first collection, shown in Milan last September for spring 2023.
“His style is now out in the open, he is an elegant designer, his clothes are elegant, and they have a high component of sexiness,” said Gobbetti of Davis, who was appointed creative director of Ferragamo in March.
While starting from tailoring, Davis offers daily pieces that are “also sportswear, technical and versatile. He has an incredible level of taste and a very specific style in mind. He knows where he wants to go and has a good eye,” continued Gobbetti, saying that Davis had already “done a lot of work on shoes and handbags.”
Responding to an analyst, he said “compared to other designers, [Davis] is quite specific, and his offer is special and unique, without a high degree of branding and logo, marrying very well with the heritage and positioning of Ferragamo in luxury. It was a successful start.”
While the bulk of Davis’ designs will be available in stores next year, Ferragamo unveiled an edited preview of his debut collection, called A New Dawn, available to purchase for one month ahead of its official spring 2023 release, as reported.
“It was delivered on time and fully, and we are very pleased with the increased agility of our supply chain, which performed very well,” said Gobbetti. The capsule has so far received “a strong endorsement,” although he admitted it was “quite early” for a final review. But he underscored that it was a “relatively low volume of product delivery. The main objective is to keep the conversation going with customers.”
Gobbetti trumpeted continued growth in revenues in the third quarter, “ensuring especially the quality of sales throughout all our distribution channels” at full price. “We delivered progress in our operating profit and cash flow for the first nine months, while implementing the planned increase of marketing and communication expenses.”
In the nine months ended Sept. 30, net profit, including a minority interest, jumped 69.2 percent to 67 million euros, compared to 40 million euros in the same period last year, on revenues that reached 921 million euros. This compares with 785 million euros in the same period last year.
Operating profit climbed 34.8 percent to 114 million euros.
Earnings before interest, taxes, depreciation and amortization were up 19.5 percent to 241 million euros.
Retail sales rose 17.5 percent to 667.6 million euros, while the wholesale channel registered a 26 percent increase in sales to 260.4 million euros.
In the nine months, revenues in the Asia Pacific region registered a 2.1 percent increase to 315.7 million euros, representing 34 percent of the total. They were down 5.4 percent at constant exchange. The performance was impacted by the persistence of the restrictions related to the COVID-19 pandemic, in particular in China.
“China in the third quarter started off positive and the trend continued until early or mid-August, but started deteriorating with the new restrictions and was negative in September, which was significantly more difficult than July and August,” said Gobbetti. “October was the same as September, traffic was down and the consumer sentiment not the same as July and August.”
However, the executive emphasized that he was “confident that when the zero-COVID[-19] restrictions are lifted, business will improve. We have so much newness and opportunities,” although he admitted to limited visibility. At the moment, 10 percent of Ferragamo’s stores are closed in China and 70 percent of units are impacted by some form of restriction, he noted.
Korea and Taiwan continued to perform well, and Southeast Asia accelerated, while Hong Kong and Macao remain “difficult.”
Sales in Japan were up 19.9 percent to 72.8 million euros.
The Europe, Middle East and Africa region posted a 37.3 percent increase in sales to 202.1 million euros, accounting for 21.8 percent of the total. “It was a very good quarter in Europe, with record tourism boosted by North Americans, and very strong business,” said Gobbetti.
Revenues in North America were up 29.6 percent to 276.7 million euros, representing 29.8 percent of the total.
Sales in Central and South America rose 37 percent to 60.7 million euros.
By category, footwear sales climbed 23.5 percent to 419.6 million euros and leather goods were up 13.1 percent to 388 million euros.
Shoes and leather categories combined represented 87 percent of total sales.
Apparel was up 32.4 percent to 59.8 million euros.
Gross profit increased by 24.4 percent to 662 million euros. Its incidence on revenues was up 420 basis points, driven by the improvement of the full/off-price ratio and the positive impact of currencies.
“The quality of sales is one of our priorities, and we significantly decreased the percentage of off-price sales to the mix, which reinforces brand equity and the timelessness of our products,” Gobbetti observed.
Healthy margins allow Ferragamo to offer “important leverage for the investments we want to make in 2023,” he said. “While mindful of the environment and the volatility of the context, if anything we are ever more convinced of our investments.”
Gobbetti said the company was “fully on track on all its strategic priorities.”
In the nine months, operating costs amounted to 548 million euros, up 22.5 percent, and capital expenditures totaled 30 million euros compared with 26 million euros last year, mainly due to renovations of the retail network and investments in the digital channel.
Gobbetti said the company has “a healthy inventory, which is under control and slightly lower than the previous year. It’s an orderly transition, I don’t expect significant write-downs.”
The adjusted net financial position was positive for 353 million euros compared with 265 million euros positive at the end of September 2021.