MILAN — The Asia-Pacific area was confirmed as Salvatore Ferragamo’s main market in the first nine months of the year, but the U.S. was the main growth driver for the company in the third quarter.
“Revenge spending seems to have moved from one continent to the other,” said executive vice chairman Michele Norsa during a conference call with analysts on Tuesday evening, referring to a “relative slowdown” in China, impacted by the limited opening hours of stores and malls in the country to curb the spread of the COVID-19 virus. “The motivation to spend is still there, but it’s really difficult to predict how long it will take” to see fewer restrictions in China, he said.
Norsa said he’s optimistic about the Christmas season, though, with the “biggest opportunity [being] to delay the end-of-season sales,” while commenting on the Florence-based company’s net profit, including a minority interest, of 40 million euros in the nine months ended Sept. 30, compared with a loss of 96 million euros in the same period last year.
Revenues rose 33.9 percent to 785 million euros, compared with 587 million euros in the same period last year. Sales in the third quarter were up 17.1 percent.
A date for the arrival of new chief executive officer Marco Gobbetti, the successor of Micaela le Divelec Lemmi, who left in September, was revealed on Tuesday.
Gobbetti, CEO of Burberry, will join the Florence-based company on Jan. 1. Norsa was asked to comment on his own future, the upcoming strategies and whether Gobbetti would have free rein.
“Gobbetti and I know each other and it’s a pleasure to have him on board,” Norsa said. “From my strictly personal experience, when I joined Ferragamo in 2006 [as CEO, exiting in 2016 and returning in 2020], I shared my strategy with the shareholders and we agreed on the stock listing [which took place in 2011], so I expect he will have the same or even more freedom, now that there is an improved governance, with more competent and independent directors. As for the strategy, I cannot disclose anything now.”
Norsa, however, hinted at Ferragamo’s potential entry into skin care and beauty with new fragrance licensee Inter Parfums. Pressed by an analyst, Norsa said there are “no immediate plans,” but that after two or three years there is the option to develop different products. He mentioned the products to emphasize that those would also be made in Italy, while adding that Ferragamo was “very pleased” with Inter Parfums.
To ensure the continuity of the Made in Italy production and the highest level of synergies with the fashion house, Inter Parfums will operate through a wholly owned company based in Florence. The license was inked in September and marked a turning point for Ferragamo’s beauty business as its fragrance division had been managed in-house for the last two decades.
Norsa touted the company’s “accomplishments” in the nine months, recording an operating profit totaling 84 million euros, compared with an operating loss of 69 million euros in the same period last year.
Sales in the Asia-Pacific area climbed 22.7 percent to almost 310 million euros, representing 39.4 percent of the total. In the nine months, the retail channel in Greater China posted a growth of 22.6 percent at constant exchange, compared with the same period last year. In particular, at constant exchange, the retail channel was up 22.1 percent in China and 16.1 percent in Korea.
Sales in Japan rose 4.9 percent to 61.8 million euros in the nine months, with a negative trend in the third quarter, down 8.6 percent compared with the third quarter last year, due to COVID-19 restrictions, but Norsa said he is seeing improvements in the region.
The Asian continent represents more than 47 percent of total group’s revenues in the nine months.
The Europe, Middle East and Africa region was up 16.8 percent to 151.6 million euros, representing 19.3 percent of the total in the nine months. The region was up 6.1 percent at constant exchange rates in the third quarter.
Sales in North America gained 85.1 percent to 218 million euros, accounting for 27.8 percent of the total in the nine months. In the third quarter, revenues in that market were up 65.7 percent at constant exchange rates. Norsa cited California, Florida, Texas, the “sunbelt cities,” as first picking up and now “overall stronger results generally,” in cities including Chicago and Detroit, with Las Vegas “overperforming expectations.”
Norsa cited the arrival of Daniella Vitale and Vincenzo Equestre, as new CEO of North America and new CEO of EMEA, respectively. “They are first class, top managers and will be instrumental for further growth in the U.S. and a turnaround in Europe,” he said.
Revenues in Central and South America were up 59.3 percent to 43.8 million euros, and increased 47.5 percent in the third quarter at constant exchange rates.
In the nine months, the retail channel gained 37.2 percent to 570.5 million euros, accounting for 72.7 percent of total sales. As of Sept. 30, the group’s retail network counted a total of 643 points of sales, including 404 directly operated stores.
In the third quarter, retail rose 21.8 percent, with Greater China, North America, Latin America and Korea exceeding pre-COVID-19 revenues.
The direct e-commerce channel saw revenues climb 53.7 percent in the nine months. In the third quarter, the channel rose 24.2 percent. E-commerce now accounts for 8 percent of total sales.
Wholesale was up 27.1 percent to 208.1 million euros over the nine-month period, representing 26.5 percent of the total. Chief financial officer Alessandro Corsi said the channel was still impacted by the slowdown in travel retail, although there are some signs of recovery in Eastern Europe and some parts of Europe, according to Norsa. Corsi also pointed to better margins due to a higher ratio of retail compared to wholesale.
By category, footwear sales rose 34.8 percent to 341.2 million euros, accounting for 43.4 percent of the total.
Revenues of leather goods climbed 32.7 percent to 344.7 million euros, representing 43.9 percent of the total.
Apparel was up 41.1 percent to 45.5 million euros, accounting for 5.8 percent of sales. Creative director Paul Andrew left in May and the collections have been designed by an in-house team headed by Guillaume Meilland.
The company has been “working on selective price increases for key categories,” said Norsa, due to the rising costs of raw materials and shipping, but also in line with the trend of more exclusive, highly crafted products.
Capital expenditures amounted to 26 million euros, compared with 15 million euros last year, due to more investments in the retail network and in the digital channel.
Corsi touted a rationalization of costs, including travel and consulting, renegotiating rents and inventory cuts, also through the opening of temporary outlets during the pandemic, without destroying product, Norsa underscored.
Sales consensus of 1.13 billion euros and of an operating profit of 110 million euros by the end of the year was “reasonable,” the company noted.
In the nine months, the adjusted net financial position stood at 265 million euros, compared with 75 million euros at the end of September last year. Including the IFRS 16 accounting effect, the net financial position was negative for 302 million euros.