Salvatore Ferragamo-RTW-Fall-2019

MILAN — After leading the gains on the FTSE MIB index, with a peak rise of 10.4 percent, Salvatore Ferragamo shares closed up 9.9 percent to 21.25 euros on Wednesday.

The jump followed the report of the Florence-based company’s first-quarter profits and sales a day earlier, which saw net earnings climb 23.5 percent and revenues gain 4.3 percent.

Analysts, including Kepler, emphasized the “first signs of improvement” at Ferragamo, and raised its rating to hold from reduce.

Equita analysts said the group’s top line “confirms that the strategic actions set in motion are correct and effectively executed.”

“The appeal of the brand is back, with a like-for-like growth of 17.7 percent in the retail business in continental China,” according to Banca Akros, which believes the restructuring has “started bearing fruits.”

Continental China “should continue to be the growth motor, with an increase in demand from the younger generations,” said analysts at Banca Akros, which raised the target price to 20.20 euros from 18.40 euros, seeing a “diminished risk of failure in the turnaround of the company. We expect a positive reaction of shares in Bourse, even if a positive quarter is not enough to change our rating on the shares, which remains neutral.”

Kepler Cheuvreux recommended a hold rating, from reduce, with a target price of 20 euros, raised from 17 euros, while Morgan Stanley also hiked the shares’ price to 20 euros from 18.50 euros.

Societe Generale also recommended a hold rating from sell, with a target price at 20 euros, noting that the first-quarter results “give credibility to the efforts of restructuring the company.” That said, analysts there were also “cautious in light of the high valuation of shares, the contrasting track record and various false starts in the past years.”

Conversely, Mediobanca Securities’ rating was underperforming, with a target price of 16.20 euros, while admitting that the performance in the first quarter “exceeded expectations.”

In the three months ended March 31, profits totaled 11 million euros and revenues stood at 317 million euros, lifted by the performance of the brand’s Chinese customers and a strong reception of its footwear and leather goods. 

In the period, the retail channel was up 21.2 percent in China.

Globally, the retail channel recorded a 3.9 percent uptick in sales to 199.3 million euros, accounting for 62.8 percent of the total.

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.

Paul Andrew was promoted creative director of the brand in February and Guillaume Meilland maintains his role as men’s ready-to-wear design director, taking on the additional responsibility of studio director. In June, Ferragamo will show its men’s spring 2020 collection in Florence at Pitti Uomo.

In March, Ferragamo revealed a 21.1 percent drop in net profits last year, which, including a minority interest of 2 million euros, totaled 90 million euros, and revenues that decreased 3.3 percent to 1.34 billion euros.

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