Ferruccio Ferragamo

MILAN — The Ferragamos have no intention of selling the Salvatore Ferragamo company and the plan is to continue to appoint a person from outside the family to be its chief executive officer.

Those were two of the salient messages Ferruccio Ferragamo, president and newly minted interim ceo of Salvatore Ferragamo SpA, conveyed Thursday during a conference call with analysts to present the group’s 2017 financial results, which saw a 42.4 percent drop in net profits.

“To sell is out of the question,” he said, responding to an analyst pointing to the ongoing rumors about a possible family divestiture. “We love the company too much.” Letting ceo Eraldo Poletto go would make no sense if there was any idea of selling the group, he said.

The board’s approval on Thursday of the 2017 balance sheet marked Poletto’s last day at the helm of the company he joined in August 2016 from Furla, and the appointment of Ferragamo as interim ceo.

In thanking Poletto, Ferragamo said his tenure was “shorter than expected but very intense. Sometimes we agreed and sometimes we did not, but thanks to his many initiatives, there has been a renovation of the company and the way to do business. I learned from his sense of urgency and priority, his knowledge of the retail market, and I am very grateful for what he has done. I do regret it’s been a short time, we worked very closely at the beginning and I personally enjoyed it. The market is not in great favor, and now we [face] new challenges. I will put all my possible energy for future results.”

Ferragamo, who is the son of the company’s late founder, emphasized the next steps will be a sign of “continuation,” and “evolution of the many projects” initiated by Poletto, without any major change.

Asked by one analyst to define the new potential ceo, Ferragamo said this person would “not be far from Poletto’s profile, someone who believes in the company, has knowledge and sense of innovation, and expertise in the luxury business. I hope it will all fit in a chemical formula, at the right time and soon.”

As for his interim role, Ferragamo said he hoped it would be “as short as possible, but without rushing to find a new ceo,” noting he did not know whether the new executive would come from within the company or outside. He did underscore he expected “no turnaround in management,” to keep “people that believe in the company.”

He stressed that it was key to “find the right person for a soft landing” and said that, although several members of the family are part of the company’s board, “we are not looking for a family ceo. It’s more healthy to have an outside ceo, and we’ve had this for two mandates,” he said.

Poletto succeeded Michele Norsa, who led the company for a decade including through its  public listing in 2011. “I will dedicate my time, energy and expertise and ask for help from people near me, but we need to find the right person at the right time, and we are not in a hurry,” Ferragamo said.

Poletto, who attended the call, reciprocated Ferragamo’s words and said he had “learned style and vision, and a sense of integrity” from the president, acknowledging the foundations set for the future of the company. Poletto will receive more than two million euros in severance, as agreed at the time of his appointment, in addition to his fixed salary and variable compensation elements, to be agreed before March 12. The company also has voided its non-compete agreement with him.

The exit of Poletto comes on the heels of an unusually difficult and turmoil-filled 2017 for Ferragamo, which saw net earnings, including a negative minority interest of more than four million euros, drop to 114 million euros, marking a 42.4 percent decrease. Net profits were negatively impacted in the fourth quarter by about 13 million euros as a result of the new U.S. tax law. Also in the fourth quarter of 2016, the group’s profits were positively impacted by the cumulative benefit of Italy’s Patent Box 2015 and 2016.

Confirming preliminary figures reported at the end of January, revenues declined 3.1 percent to 1.39 billion euros, compared with 1.43 billion euros in 2016.

In the 12 months ended Dec. 31, earnings before interest, taxes, depreciation and amortization decreased 23.3 percent to 249 million euros, from 324 million euros in 2016.

Operating profit dropped 28.6 percent to 186 million euros from 261 million euros.

Capital expenditure totaled 88 million euros compared with 74 million euros in 2016, mainly channeled toward the group’s new distribution center in Florence, which is due to be completed in 2018; its IT projects, and the store network. Chief financial officer Ugo Giorcelli said the company had strengthened its store network and organization.

Giorcelli said the company “got into 2018 with a partial hedging protecting the beginning of the year, with effects fading in the second part of the year,” with expectations of another year of transition.”

The unfavorable trend registered in the last few months of 2017 have continued into the first part of 2018, also due to the negative impact of the appreciation of the euro, and to an unfavorable channel mix, the company said. Giorcelli said Poletto had created a “terrific team,” and praised the recent collection presented last month in Milan, which had been “received very well.” One of Poletto’s first decisions at Ferragamo was to name a trifecta of designers rather than one single creative director, in the wake of Massimiliano Giornetti’s exit in March 2016. Poletto opted to appoint Paul Andrew, Fulvio Rigoni and Guillaume Meilland in charge of women’s shoes, women’s ready-to-wear and men’s rtw, respectively. In October last year, Rigoni exited the company, following a mixed response to his designs, and Andrew was charged with the women’s rtw collections, too. The company held its first coed runway show last week to unveil its men’s and women’s fall 2018 collections.

Asked about China, Giorcelli said there had been “a deceleration in the last part of the year.” The Asia-Pacific area was confirmed as the group’s top market, but revenues decreased 2.1 percent. The retail channel in China rose 2.5 percent and the Hong Kong performance improved in the last quarter. The slowdown in the area was the “result of normal ups and downs in the business, there was no specific reason, and I cannot see a permanent decrease,” Giorcelli said. He also noted “there are signs of recovery and the timing of year-end” had an impact. “It is not structural, there is nothing to worry about. China is picking up again, we are pleased with the developments.”

The net financial position at the end of December represented capital on hand of 127 million euros, compared to a net debt of eight million euros on Dec. 31, 2016, mainly due to a reduction in net operating working capital, equal to 104 million euros, and to the Patent Box tax break.

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