MILAN — Balance. That is what Salvatore Ferragamo SpA chief executive officer Michele Norsa says is the key to the fashion group’s continued growth, even as markets like China begin to slow.
This story first appeared in the September 24, 2015 issue of WWD. Subscribe Today.
Ferragamo has seen profits and sales increase — even in China — because of “a balance per gender, category and market,” Norsa said. To wit, China and a strong performance of the brand’s handbag and leather accessories helped drive profits and sales up 13 and 10 percent, respectively, in the first half of the year. This was on top of a strong 2014, which closed with growth in profits and sales, driven again by handbags and leather accessories and by gains in all geographic markets, especially its retail channel in China. The retail division gained 17 percent in the six months ended June 30.
Since his arrival in 2006, Norsa has helped spearhead the development and expansion of the Florence-based group under Ferruccio Ferragamo’s chairmanship, and listed the company on the Milan Stock Exchange in June 2011. The group’s shares have gone from nine euros, or about $10 at current exchange, on the first day of trading to 23.34 euros, or $26.06, at press time. The flotation of about 25 percent of its stock valued the company at 1.5 billion euros, or $1.67 billion. Norsa was the first Ferragamo ceo who was not a member of the controlling family. The executive has a track record of working with a number of Italian fashion families, including the Marzottos, the Benettons and the Rizzolis, and helped list Valentino Fashion Group in 2005 when it was then owned by the Marzotto family.
In an interview at the brand’s showroom in central Milan ahead of the Chinese stock market troubles in August, the expressive executive pointed out that the women’s category accounts for 60 percent of Ferragamo’s sales; leather goods for 37.5 percent, and shoes for 42 percent. Norsa, who spends most of his time in Florence and the rest between Milan and traveling around the world, has always valued the travel retail category, carefully monitoring the changing movements of tourist flows. “We have worked very much on belts, small leather goods and accessories, which are transversal categories in terms of race and gender and are easily carried around,” he explained. “This is a practical advantage and prompts multiple purchases.”
The ceo believes it’s “fundamental to follow geopolitical developments” around the world and that the “ability to foresee behavior and investments is an important element of our business.” He noted that “the level of information is so detailed that if you are interested in global phenomena, it’s easy to have access.”
Proving his intellectual curiosity, Norsa mentioned several seemingly unrelated bits of information as having an impact on business, ranging from the price of pork meat to that of palm oil or the fact that the Chinese have taken control of the port of Athens. He cited the Hudson Bay’s Co.’s acquisition of Germany’s Kaufhof department store chain as an example of investments that “anticipate consumer” behavioral patterns.
The fact that more than 90 new airports are being built in China isn’t lost on Norsa, who studies how the Chinese travel within Asia. He noted that airports afford a brand great visibility. “Technology and digital screens have helped bring a higher level of quality in communication at airports, contributing to making brands more desirable,” he said.
Speaking during a conference call with analysts in late August about the company’s first-half figures, Norsa said, while he was no “fortune-teller,” the company is keeping its projects running, including the opening of new stores in China in the second part of the year. “We are confident business can improve in Mainland China, with a possible boost in domestic consumption,” he said on the call.
The Asia-Pacific region, the group’s largest market, reported a 7 percent rise in sales in the first half, despite deteriorating trends in Hong Kong and Macau in the second quarter, impacted by fewer visitors and reduced spending — trends that are also related to the new traveling destinations of the Chinese. That said, Hong Kong “remains for us the first city in the world for retail. The performance of stores, in general, in terms of sales per square meter continues to be one of the highest. Hong Kong’s resolve to keep investing to attract tourists, confirmed by the new fast train that will connect it to Macau, is certainly reassuring for the future,” noted Norsa.
Reflecting the brand’s global distribution, weakness in Hong Kong and Macau was balanced by growth in new markets in Mexico, Australia, Canada, Japan and Europe in the first half.
Second- and third-tier cities in China have been more consistent, as shoppers there behave differently than those in Shanghai and Beijing, for example, as they are “less exposed to the totality of brands.”
Elaborating on Ferragamo’s product categories, Norsa said “belts are highly successful in the U.S., with their wide range of prices.” Footwear, the company’s core business and part of its heritage, handed down by the namesake founder dubbed “cobbler to the stars” in light of his success with Hollywood actresses, is the main product sold online. To mark the 100th anniversary of the founder’s arrival in Hollywood, the company officially inaugurated its newly renovated boutique on Rodeo Drive on Sept. 9 with a unique concept by William Sofield. “This is the first such important project in Los Angeles in 10 years and particularly interesting also for the future,” Norsa said.
He touted Ferragamo’s “ideal combination of iconic products,” such as the Vara ballet pump, that contribute to the appeal of the brand and stimulate repurchases, with new seasonal goods. Asked how ready-to-wear fits in, also in light of its smaller business, Norsa said it was “decisive” as a creative outlet for the creative director, Massimiliano Giornetti. “It also has a leading effect in terms of evolution, communication and events.”
Though accounting for 7.3 percent of sales last year, “ready-to-wear remains an important business,” in different ways in different countries, Norsa pointed out. “It is much more important in Japan, Latin America and Mexico, for men’s in the latter case, especially.”
The public listing has offered the brand international visibility and, in parallel, the company has significantly grown profits and sales since then, reaching net profits in 2014 of 157 million euros, or $193.4 million, on sales of 1.33 billion euros, or $1.63 billion at average exchange. Over the past three years, Ferragamo has been channeling its investments into its own retail, opening new stores and renovating existing units.
Norsa has also been instrumental in leveraging the potential of the company’s heritage, “the charm of the brand,” as well appealing to the “loyalty” to the Made in Italy tradition. “This has been one of the footholds to build the brand.”
Insistent about protecting the label’s consistency, Norsa highlighted the importance of focusing on its core business, while eyeing potential in unexpressed areas such as watches, hard luxury and jewels. “It’s one single brand, with two licenses, for watches and eyewear, without ever exceeding in segmentations.” An event will be held in New York in December to present new eyewear and timepiece projects.
While protecting its legacy, Ferragamo has been developing its own Web site and e-store, launched six years ago. The brand is also available at online stores of Neiman Marcus and Saks Fifth Avenue, for example. “This channel is the one that is growing more rapidly in the U.S. One customer in 10 buys online in that market,” he said.
The brand is available online in 36 countries in the U.S., Europe, Mexico, Korea and Japan. Norsa said the “importance of digital in communication is global, and in terms of business especially in the U.K. and the U.S.” Globally, the company’s e-commerce grew around 35 percent in the first half of the year.