MILAN — “The product is key,” said Salvatore Ferragamo chief executive officer Micaela Le Divelec Lemmi, and this was a cornerstone that helped the Florence-based company raise profits and revenues in the first quarter.
“The brand is hot again, we have the right product which is boosting traffic,” concurred chief financial officer Alessandro Corsi. “In the past, the product was wrong and it did not match the customer’s taste and desire. We learned from our mistakes and hopefully we are back.”
During a conference call with analysts on Tuesday, Le Divelec Lemmi and Corsi commented on the company’s 23.5 percent spike in net profits, including a minority interest, in the three months ended March 31. Earnings reached 11 million euros, compared with 9 million euros in the same period last year.
Revenues rose 4.3 percent to 317 million euros, compared with 304 million euros in the first quarter last year.
As of March 31, the group had 662 points of sales, compared with 672 at the end of December, and including 398 wholly owned stores and 264 third-party operated units. The company closed three stores, including two in the U.S. and one in Taiwan.
In the first quarter, the retail channel recorded a 3.9 percent uptick in sales to 199.3 million euros, accounting for 62.8 percent of the total.
Like-for-like sales were up 2.2 percent, despite a negative performance of the secondary channel.
The wholesale channel gained 5.5 percent to 112.8 million euros, representing 35.6 percent of the total, thanks to a positive performance in the main geographical areas and to double-digit growth in the travel retail channel, despite a negative performance of the perfume business.
The Asia Pacific area was the group’s main market, up 7.2 percent to 122.8 million euros, representing 38.7 percent of the total.
In the period, the retail channel was up 21.2 percent in China.
Le Divelec Lemmi, noting that Ferragamo was one of the first brands to be present in China, said she did “not envisage a further strong development of stores at this stage. We keep our eyes open on new interesting developments, also considering the level of our competitors, but we are still in a phase of fine-tuning our network in China and other regions.”
Corsi said that China “is very strong” and that the rest of Asia and Europe also benefit from Chinese shoppers, who are “the most important customers and drivers of growth.” Also, he noted a shift to customers aged below 35 — in sync with the brand’s strategy and showing additional further potential.
Europe saw a 2.8 percent increase in revenues to 80.4 million euros, accounting for 25.4 percent of the total, lifted by a positive contribution in both distribution channels.
North America was stable, totaling 65.3 million euros and representing 20.6 percent of the total, although Le Divelec Lemmi noted that the U.S. luxury market “is affected by a very critical sentiment reflecting the performance of department stores. We are vigilant to see the potential evolution and make sure we take the right opportunities.” She also said it was difficult to provide a clear market outlook because of the inconsistency of the “general sentiment of consumers” as it also depends on the area and “mall by mall.”
In the quarter, Japan was up 2.1 percent to 30.3 million euros, representing 9.6 percent of the total, boosted by both the retail and wholesale channel.
Revenues in Central and South America were up 13.8 percent to 18.1 million euros, accounting for 5.7 percent of total.
Footwear was up 7 percent to 132.2 million euros, accounting for 41.7 percent of the total. The ceo said that the Vara and Varina designs are still the top-selling styles, “always in the assortment and iconic, still representing brand status.” However, the company is working at integrating these continuous models with new ones and Le Divelec Lemmi trumpeted the “very good results” seen, for example, with the introduction of sandals from the fall/winter 2019 show. She also said the Rolo Loafer has been particularly successful in China. However, “there is still work to be done, to fine-tune the aesthetic with the customers,” she cautioned. “Step by step, for the long run.”
In the quarter, handbags and leather accessories rose 8.4 percent to 126 million euros, representing 39.7 percent of the total.
Apparel decreased 5 percent to 17.6 million euros, accounting for 5.6 percent of the total. Responding to an analyst, Le Divelec Lemmi admitted that the ready-to-wear category “is still not performing up to level,” but that the company has “many initiatives” in the pipeline. She reaffirmed her confidence in the division as “a driver of consumer confidence and loyalty,” conceding that it was “most affected” by the recent changes at the brand. To further boost the category, Ferragamo is reinforcing its support in stores, and the ceo cited, for example, the new “botanical experience” format introduced for spring, and particularly effective in the Chinese market.
Fragrances registered a 22.8 percent decrease to 17.4 million euros, representing 5.5 percent of the total, mainly due to a different timing in product launches compared with last year.
Le Divelec Lemmi also admitted that Ferragamo has “not been very active in the past” in engaging on social media and in marketing activities, but priorities have clearly changed as she touted the efforts to create a community of influencers and micro-influencers. She ticked off the Gancini project launched in January and the activities with influencers at Milan Fashion Week in February, as well as attending for the first time the Met Gala and the involvement with celebrities for the occasion. She praised “the ability they have to talk about the brand” and how the company has benefited from “a lot of attention on social networks.” Lili Reinhart, Cole Sprouse and Solange Knowles and Elizabeth Debicki are some of the celebrities who donned custom-made designs by Paul Andrew for the Met.
Andrew, who was promoted to creative director of the brand in February, has put his own namesake footwear label on hold. As reported, Guillaume Meilland maintains his role as men’s ready-to-wear design director, taking on the additional responsibility of studio director, coordinating the development of all product categories under Andrew’s leadership. Andrew joined Ferragamo in September 2016 as women’s footwear director and was promoted a year later to women’s creative director.