ROME — The Ferragamos are out to become more competitive.
The family, which also owns Ungaro, has mapped out a medium-term growth plan that revolves around new key executives in design and production who are being given more authority than ever; a stepped-up retail expansion program, and greater design unity between Ferragamo’s ready-to-wear and accessories collections.
The last category is still Ferragamo’s cornerstone, a fact highlighted by the breakdown of the company’s $591 million consolidated sales in 2003: the 10,000 pairs of men’s and women’s shoes produced daily generated 38.9 percent of sales, while bags and small leathergoods accounted for 25.1 percent; men’s and women’s rtw contributed 16 percent of sales, and eyewear, perfume, royalties and Ungaro made up the balance. Dollar figures are converted from euros at average exchange.
“We’re never satisfied,” said Ferruccio Ferragamo, chief executive officer of the luxury goods house, in an interview. “We’re ambitious and eager for new challenges. We want to keep running but we want to run in the right direction.”
Ferragamo dismissed a multibrand strategy or far-flung diversification as possible growth areas. “Our focus is to consolidate all our categories, such as product, distribution and retail operations,” he said.
As reported, over the past seven months Ferragamo has created three new executive posts: Hervè Martin joined as product general manager in September, while Nathalie Gervais and Fulvio Zendrini arrived in March as creative director and head of international communications, respectively.
“The boom of fashion houses diversifying with accessories has resulted in a fiercer competition and a consequent loss of market share for Ferragamo, which is why we felt the need to implement our team,” said Ferragamo.
Attracting a marquee name to design the company’s rtw clearly didn’t fit the bill, Ferragamo said, because the idea is to push the accessories rather than suffocate them for the sake of the apparel.
Armando Branchini, vice president at fashion consultancy Intercorporate, said Ferragamo relies on a solid and serious product that will only be boosted by the company’s new vision for the future. “This optimistic strategy shows that the Ferragamos have their feet on the floor. It makes the company more competitive and further elevates the product’s awareness,” Branchini said, referring to the new executive additions.
A chief executive at an Italian headhunting firm, who requested anonymity, was both optimistic and perplexed by the new appointees. “On one hand, the choice to invest in new people denotes an opening to the future. On the other, the governance model is unclear because the family maintains a strong foothold in key decisions, which makes me think that some of the roles could overlap,” she said.
A fashion insider said it’s important for the family to concede the new hires the freedom in which to operate. “In the past, what happened was that there was a good relationship between the family and the new executives in the beginning but after a while, the marriage became shaky because the family still wanted total control,” said the source.
The search for the replacement of Graeme Black, the women’s rtw designer who left in mid-April when his contract expired, is yet to be completed.
Giovanna Gentile Ferragamo, vice president of Salvatore Ferragamo Italia, said it was first necessary to reorganize the internal design department to guarantee continuity and uniformity. “It’s better for everyone to have one point of reference. It was important for us to update with a more incisive and creative product,” she said.
The new design team will imbue the collections with more verve and edge, a move made years ago by many of Ferragamo’s competitors, such as Prada and Gucci.
“We want to broaden our clientele but we’re a lifestyle brand more than an age target,” said Ferragamo. “We want to update that lifestyle and make it more appealing to a younger clientele without tweaking our characteristics.”
As a result, the Ferragamos have dissolved the “image committee,” in which all the family members participated to coordinate the product’s image across the board. “We want to focus on the product and raise its awareness to the consumer. It will take time, though, to see the results at retail,” Ferragamo said.
A retail expansion that spans from directly operated stores to store corners is still a worthy investment, according to Ferragamo, who is channeling a hefty chunk of the company’s annual $46 million investment budget to the opening of 66 points of sales this year, including 15 freestanding shops, both directly owned and franchised.
By year-end, Ferragamo will have a total of 494 sales points worldwide, a 15 percent increase over 2003.
Ferragamo is also trying to fix the fact that numerous looks on the runway don’t actually make it into the stores. “We’re working to make sure that we calibrate the right number of runway exits to avoid running into manufacturing difficulties or ending up with extra stock,” said Ferragamo.
Asia and the Far East make up the lion’s share of sales with 46.2 percent, while Europe and the U.S each represent a 26 percent slice of the pie.
Ferragamo noted that after a shaky 2003, this year is already looking rosier with upbeat signals coming from Asia — namely China, where the internal flow of seven million tourists stimulated retail sales, especially in Hong Kong — and from the U.S.
“Encouraging signals are coming from the U.S. where the low dollar has boosted domestic consumption,” said Ferragamo. He added that in the first quarter of 2004, the firm’s U.S. retail operations registered a 30 percent increase compared with the same period last year. “It confirms the brand’s strength and our consumers’ faith,” noted Ferragamo.
As for new markets, Ferragamo admitted the company lags behind its competitors in exploring new areas other than Russia. But it is looking into production facilities in China — where the company already has 39 stores with six more opening this year — to avoid missing out on future opportunities.
As for the copious third generation of Ferragamos — 23 nieces and nephews — the family has voted for the entrance of only three members: James Ferragamo, merchandising manager; Diego di San Giuliano, who is charge of the developing women’s footwear, and Angelica Visconti, who is still training in various departments.
They are the children of Ferruccio Ferragamo, Fiamma di San Giuliano and Fulvia Ferragamo, respectively.
Ferragamo continues to bypass the licensing route, preferring to produce everything in-house, including the fragrances and watches, launched last November, which are designed and distributed out of Florence but assembled in Switzerland.
Only the eyewear is licensed to Luxottica for technical purposes. “We’re conservative when it comes to licenses because it’s still the best way to have total control and safeguard quality,” said Ferragamo.