MILAN — Despite the challenging macro environment, Salvatore Ferragamo’s chief executive officer and general manager Marco Gobbetti expressed his satisfaction with the “excellent progress on our strategic priorities and on building the foundational elements to accelerate our growth.”
Case in point, Gobbetti can already tick off one box — his expectation, voiced in May, to start upscaling the brand’s digital presence, reaching out to a younger consumer target and improving customer experience. And, during a call with analysts on Tuesday to comment on the sales and profitability growth of the company in the first half of the year, he touted the “transformational deal” with Farfetch, inked last month.
Underscoring the technical capabilities of Farfetch, he said it is “one of the most, if not the most, advanced platforms in luxury, and it will help leapfrog Ferragamo’s [digital business]. They have the target audience we are after, they move very fast and will help us tighten our logistics and integration of inventories.”
Responding to a question from an analyst, the executive said that Ferragamo was “focused on the brand, not on participating in the deal with [Compagnie Financière] Richemont” inked last month. As reported, Richemont is selling a majority stake in Yoox Net-a-porter to Farfetch and Mohamed Alabbar.
Gobbetti was pleased with the “continued solid growth of revenues and profitability in the second quarter” of the year, with positive performances across all geographies, with the exception of China. This led the Florence-based company to report a net profit, including a minority interest, that almost doubled to 62 million euros in the first six months of the year, compared with 33 million euros in the same period last year.
Revenues totaled 630 million euros, up 20.3 percent compared with 524 million euros registered in the first half of 2021.
Asked about turning Ferragamo around in the current global environment, while conceding he was “analyzing and monitoring” the situation, and far from being “insulated,” Gobbetti said that “barring significant crises,” he believed “the growth opportunity we have from the repositioning of the brand and the recruitment of a new customer will not be significantly affected by the macro [scene] because the market is so broad and the opportunity so big.”
This reinforces Gobbetti’s ambitious plan, laid out in May, that sees Ferragamo aiming to double revenues in four to five years and to double marketing and communication spending as a percentage of revenues beginning in 2023. This will lead to a cumulative investment of 400 million euros in the 2023-to-2026 period focused on store renovations, technology and supply chain.
In fact, chief financial officer Alessandro Corsi said that, as of June 30, capital expenditures totaled 18 million euros, compared with 13 million euros in the first half last year, mainly due to renovations of the retail network and investments in the digital channel, and that capex for the whole year will amount to between 50 million and 55 million euros. Marketing expenses are seen as representing 7 percent of sales in 2022 and investments in communication will be upped to support the launch of the new collections in the first quarter of 2023.
Gobbetti reiterated his belief in creative director Maximilian Davis, who will present his first collection for Ferragamo on Sept. 24 in Milan. “He is a very gifted and talented designer, he has great skills in ready-to-wear, he’s elegant, sharp and modern, strong on womenswear as well as menswear and understands how we position the brand. We need to see at least a full year of collections, and I am very confident, there are great ideas in the pipeline,” contended Gobbetti, who tapped the Trinidadian British fashion designer in March, shortly after his own arrival in January from Burberry.
Gobbetti said that Ferragamo’s luxury positioning “will not change, if anything we will probably increase the value for our consumers in terms of offer.” He said he had “already integrated pricing and Forex,” while perhaps there could be some adjustments next year.
In the first half, earnings before interest, taxes, depreciation and amortization totaled 180 million euros, compared with 144 million euros in the same period last year, with an incidence on revenues of 28.5 percent, up from 27.5 percent last year.
Operating profit rose 44.7 percent to 95 million euros. Corsi said the operating profit consensus of 180 million euros for the year was “reasonable,” although he said that in the second half it will be “less than proportional” on the first half.
The retail channel was up 16.5 percent to 441 million euros, representing 70 percent of total sales. “Full-price retail sales over-performed, driving gross margin and operating profit in the first half,” said Gobbetti, who was “encouraged by the retail performance in the third quarter to date, while mindful and cautious in the short term of the more volatile and challenging macroeconomic backdrop.”
As of June 30, wholesale revenues grew 40.9 percent to 192.3 million euros.
Sales in the Asia Pacific region decreased 1.5 percent to 217.8 million euros, mainly caused by the restrictions to curb the spread of COVID-19, in particular in China. The area accounts for 34.4 percent of the total. Gobbetti said he was “encouraged by trading in the beginning of the third quarter,” with improving trends at retail. China “continued to improve until very recently — although it was not yet positive, but close. We will now see how it evolves, given the new restrictions in a number of cities.”
In the first half, revenues in Japan rose 28 percent to 51.2 million euros.
Sales in the Europe, Middle East and Africa area climbed 45.8 percent to 136 million euros, accounting for 21.6 percent of total sales.
North America was up 41.6 percent to 188.1 million euros, representing 29.7 percent of the total.
Sales in Central and South America rose 44.2 percent to 40.2 million euros.
By category, shoes were up 26.2 percent to 280 million euros, accounting for 44.2 percent of the total.
Sales of leather goods increased 16.5 percent to 271.8 million euros, representing 43 percent of the total.
Apparel climbed 39 percent to 40 million euros and accessories grew 35.3 percent to 39.8 million euros.
As of June 30, the adjusted net financial position was 309 million euros, compared with 205 million euros at the end of June last year. Including the IFRS 16 effect, the net financial position was negative for 290 million euros.