Details at Salvatore Ferragamo RTW Spring 2019

MILANSalvatore Ferragamo Group closed a third quarter that chief executive officer Micaela Le Divelec Lemmi characterized as “transitional,” while noting that the company had “started to see positive signals.”

During a conference call with analysts on Thursday, she admitted the company’s results were “not very much consistent,” but that they spurred management to “work harder to implement our strategies in the months ahead.”

In the nine months ended Sept. 30, the Florence-based luxury group reported a 17.5 percent decrease in net profit, including a minority interest, to 65 million euros, compared with 79 million euros in the same period last year.

Earnings before interest, taxes, depreciation and amortization dropped 7.9 percent to 149 million euros compared with 162 million euros last year. In the third quarter, EBITDA increased 27.4 percent to 32 million euros.

In the nine months, operating profit was down 11.4 percent to 102 million euros.

Revenues decreased 3.3 percent to 972 million euros, compared with 1 billion euros in the first nine months last year. In the third quarter, sales rose 3.9 percent to 298 million euros.

In the nine months, the retail channel was down 3.2 percent to 627 million euros, representing 64.5 percent of the total. Like-for-like revenues were affected by lower end-of-season sales and were down 1.5 percent. In the third quarter, retail sales were up 1.4 percent and like-for-like sales were down 0.9 percent.

Chief financial officer Ugo Giorcelli underscored the “quality of revenues this year,” compared with more discounted sales last year. He also said “gradually,” there will be a return to growth in like-for-like sales. “We are relatively satisfied with full-price business and in the third quarter we had positive signals in key locations and cities,” said Le Divelec Lemmi, who took on the role of ceo at the end of July.  As of Sept. 30, the group counted 679 points of sales, of which 407 were directly operated stores.

The wholesale channel was down 3.1 percent to 329 million euros, representing 33.9 percent of the total, but in the third quarter it was up 10.8 percent also thanks to shifted deliveries to the third quarter from the second one. Le Divelec Lemmi said the company was “evaluating the quality of the wholesale network in a qualitative way.”

The Asia Pacific area was confirmed as the group’s main market, down 1.9 percent to 363.2 million euros in the nine months, accounting for 37.4 percent of total sales. Giorcelli emphasized positive signs from Mainland China, including the retail channel and Hong Kong. He pointed to some negativity in Korea and India. The retail channel in China, after a very strong nine months last year when it was up 15.5 percent at constant exchange rates, grew 1 percent.

Le Divelec Lemmi said in Asia “from time to time there is a shift from one market to another,” underscoring how they are all different from one another, and adding that she did not see any change in trend in the approach to the brand and its relevance in the region. She also mused: “There are many other markets beside China.” Giorcelli said the company had seen more domestic consumption from Asian customers rather than from tourism.

Europe was down 5.5 percent to 249 million euros, representing 25.6 percent of total sales.

Sales in North America decreased 4 percent to 222.5 million euros, accounting for 22.9 percent of the total and penalized by the currency trend and the negative performance of department stores. At constant exchange rates, revenues were down 1.2 percent, although the retail channel showed growth. “The U.S. is one of the key areas we are working on and the current trend is not consistent market by market and between markets, channels and stores,” said Le Divelec Lemmi, targeting “more consistency in the coming months.” She also touted the brand’s “very good reputation in the U.S. — we don’t feel it’s compromised.”

Japan was down 0.4 percent to 86.3 million euros, mainly due to the strategic rationalization of the wholesale channel in the first half, while the retail channel registered a positive trend.

Revenues in Central and South America were down 3.6 percent to 50.8 million euros, penalized by the currencies’ trends. At constant exchange rates they rose 3.3 percent.

Footwear, the group’s core business, continued to suffer, posting a 6.2 percent decrease to 405.6 million euros, accounting for 41.7 percent of the total. “We are not on track with the ladies’ shoes,” the ceo admitted.

On the contrary, handbags and leather accessories showed an increase of 1.9 percent to 374.5 million euros, accounting for 38.6 percent of the total. Le Divelec Lemmi said the category showed improvement in the third quarter, pointing to the success of the Studio Bag and also small leather goods, which she defined as “very relevant and continue to have a positive contribution.” At constant exchange rates, the division grew 3.4 percent.

Apparel decreased 11.6 percent to 54.6 million euros, representing 5.6 percent of the total.

Paul Andrew and Guillaume Meilland are creative directors of the women’s and men’s collections, respectively.

Fragrances were up 2.6 percent to 66.4 million euros, accounting for 6.8 percent of the total.

Capital expenditures equaled 45 million euros, compared with 51 million euros in the nine months last year, mainly aimed at the company’s distribution center, store network and IT projects. Le Divelec Lemmi said that the company is investing in ads and promotion and it is “starting a program of activities to support the top line.”

As of Sept. 30, the net financial position was positive at 140 million euros, compared with 95 million euros at the end of September last year.

Le Divelec did not give any outlook or confirm a consensus. Giorcelli was also cautious, saying that “there is no common trend on all markets,” while noting that “some markets were showing good signs of evolution” and that the company was “encouraged by the positive signs.”

Asked about the organization, the ceo said it was “a continuous review,” working “case by case” to fine-tune it, admitting she was still looking at some positions. “It’s an ongoing process and it’s not completed.”

Pressed by one analyst to provide more details on her strategy, Le Divelec Lemmi said it is “a process that will take some time” and it’s a “long-term program to look forward to sustainable growth.”


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