MILAN — Michele Norsa on Tuesday led his last conference call as chief executive officer of Salvatore Ferragamo SpA – and played up the group’s management strength and geographical balance.
Norsa will step down Wednesday and be succeeded by Furla ceo Eraldo Poletto, as reported.
The company said Norsa, who led the company for 10 years and spearheaded its initial public offering, would be selling his 50,000 shares which the holding company Ferragamo Finanziaria has committed to purchase by Aug. 31. Also, it revealed that Norsa, who does not have a non-compete agreement, will receive compensation of 1.8 million euros, or $2 million.
Norsa will continue to collaborate with the group as a strategic adviser of Ferragamo Finanziaria.
Chairman Ferruccio Ferragamo said during the conference call to discuss the group’s first-half results that he was “very grateful” for the “10 wonderful years” with Norsa, highlighting his achievements. “I owe him a big thank you in front of you,” said Ferragamo.
Asked by one analyst about the future of the Florence-based firm under a new ceo, Norsa said the company was “very solid, with a very strong management team, used to working together and deliver accuracy in budgeting.” He also emphasized a “well-balanced” business in terms of geographical markets. “The second half will afford the opportunity to see what we have prepared,” he said.
Commenting on the first half figures, Norsa underscored a scenario marked by “very high volatility.”
In the six months ended June 30, growth in the Americas and Japan helped offset a slowdown in Asia Pacific and Europe. Ferragamo posted a 2.3 percent gain in net profit to 90 million euros, or $100.8 million, compared with 88 million euros, or $103 million, in the same period last year.
Revenues were down 1.7 percent to 710 million euros, or $795.2 million, compared with 722 million euros, or $844.7 million, last year.
Operating profit was flat, totaling 135.5 million euros, or $151.7 million.
Earnings before interest, taxes, depreciation and amortization inched up 0.9 percent to 166 million euros, or $186 million.
Sales in Asia-Pacific were down 4 percent to 255.6 million euros, or $286.2 million, accounting for 36 percent of the total mainly due to a sluggish business in Hong Kong. Retail in China was up 1 percent, despite the challenging comparison base (up 17 percent in the first half last year) with an acceleration in the second quarter.
Mainland China, said Norsa, is “moving back to normal business,” with a lower price gap, and an “increase in internal mobility and a growing middle class,” Norsa said. The region improved in the second part of June and July, he added. Hong Kong was weak at the beginning of the quarter, with the last part of the second quarter starting to improve, he noted. Macao was difficult to describe, but, “following the investments made by Mainland China in infrastructures,” Norsa said he could see even “more families than gamblers” traveling to the city.
Europe was down 3.3 percent to 189 million euros, or $211.7 million, impacted by lower tourist flows.
North America was up 2 percent to 167.4 million euros, or $187.5 million, representing 23.5 percent of the total. Despite a strong currency that impacted tourist flows, retail was up 6 percent, while wholesale was down 4 percent, also due to the challenging comparison base (up 24 percent in the first half).
“The U.S. is probably the most stable country in terms of economy, ” said Norsa. “Retail differs from city to city, with Miami and New York suffering and second- and third-tier cities doing better, the West Coast well and Canada extremely well.” He also highlighted a “much better July” and the opening of a store in Toronto last week. He said he could not forecast the impact of the presidential election in November.
Japan was up 2 percent to 63.6 million euros, or $71.2 million, decelerating compared with the last months of 2015, due to fewer Chinese tourists, also impacted by the appreciation of the yen.
Central and South America area continued solid growth, despite the penalization of the currency, reporting revenues up by 1 percent at current exchange rates and by 12 percent at constant exchange rates to 34.5 million euros, or $38.6 million.
Dollar figures were converted from the euro at average exchange rates for the periods to which they refer.
As of June 30, the group’s network counted 662 points of sale, and 388 directly operated stores. Norsa pointed to the opening of seven to 10 directly operated stores coming up, including one in Las Vegas. The store in Tokyo’s Ginza will reopen in October after renovations.
The wholesale and travel retail channel included 274 third-party operated stores as well as the presence in department and specialty stores.
Retail was down 2 percent to 429.6 million euros, or $481.1 million, picking up in the second quarter. Wholesale decreased 1.4 percent to 268.8 million euros, or $301 million. Chief financial officer Ernesto Greco said Ferragamo “did not overload the wholesale business,” expecting a more positive second half for both distribution channels.
By category, shoes were up 1 percent to 308.6 million euros, or $345.6 million, accounting for 43.5 percent of the total. Handbags and leather accessories were down 3 percent to 263.4 million euros, or $295 million, with a tough comparison in the first half of last year, when they were up 16 percent. Asked about this performance, Norsa said the company has “a good price structure in leather goods, but we need to adjust merchandising in different areas. We’ve seen a sudden change in consumers.” Ferragamo is working on “specific” capsule collections, he said, adding that the company “reconfirmed” a collaboration with Sara Battaglia.
Apparel was down 4.6 percent to 41.3 million euros, or $46.2 million. Fragrances were down 6 percent to 40.8 million euros, or $45.7 million. The launch of the new men’s fragrance “Uomo [Man]” is expected to boost this category in the second half.
Responding to analysts, Greco said hedging will be “close to zero in the full year.”
As of June 30, capital expenditures reached 26 million euros, or $29.1 million, compared with 30 million euros, or $35.1 million, at the end of June last year, mainly attributable to the opening of new stores, the enlargement and refurbishment of existing key locations, in addition to continuing logistics enhancements and digital projects. Norsa highlighted a “more aggressive e-commerce” going forward, investing in “keeping the business within the company’s perimeter and control.”
Net debt stood at 75 million euros, or $84 million, compared with 98 million euros, or $114.6 million, at the end of June last year, after a dividend of 78 million euros, or $87.3 million.
The company also approved the merger by incorporation of the wholly owned subsidiary Ma.Ga. Immobiliare S.r.l. in Salvatore Ferragamo SpA Ma.Ga. owns plots of land in the area where the company plans to expand its Osmannoro site in Tuscany for the construction of a new logistic hub.