MILAN — Investments in Moschino and Philosophy dented profitability at Aeffe SpA in the first half despite increased revenues.
In the six months ended June 30, net profit dropped 76.9 percent to 35,000 euros, or $40,950, from 150,000 euros, or $205,500, in the same period last year. But revenues grew 6.3 percent to 128.7 million euros, or $150.6 million, compared with 121.1 million, or $166 million, last year.
Sales of the ready-to-wear division were up 5 percent, totaling 99.5 million euros, or $116.4 million, while the footwear and leather goods division grew 22 percent to 46 million euros, or $53.8 million, before interdivisional eliminations.
“In light of the continued appreciation of the market, also witnessed by a 7 percent increase in the orders’ backlog for the next autumn/winter collections, we have conceived a development plan designed to capitalize on the positive momentum for the group, through the identification of opportunities for growth in the medium-long term,” said executive chairman Massimo Ferretti. “In a global and very competitive market, we believe it is the right time to undertake specific investments to promote the desirability and the distinctiveness of our brands, both in terms of visibility and positioning and retail distribution expansion.”
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Aeffe controls the Alberta Ferretti, Moschino and Pollini brands, and produces and distributes collections for labels including Emanuel Ungaro, designed by Fausto Puglisi and Cédric Charlier. In June, the company signed a multiyear licensing agreement for the production and worldwide distribution of Jeremy Scott’s namesake rtw label.
Earnings before interest, taxes, depreciation and amortization decreased 22 percent to 9.8 million euros, or $11.4 million, mainly dented by the apparel division. Operating profit fell 45.5 percent to 3.4 million euros, or $3.9 million.
Managing director and chief financial officer Marcello Tassinari told WWD that the key factors impacting profits were the initiatives set in motion to develop the Moschino brand and relaunch the Philosophy label with the arrival of new creative director Lorenzo Serafini. “In light of the very favorable moment for Moschino, we have decided to push investments, advertising, marketing and communication, and events to promote the brand, such as its men’s collection that will be produced in-house starting from the fall season.”
Asked about the arrival of a new general director at Moschino, following the exit of Alessandro Varisco at the end of June, Tassinari said it is to be expected in the fall.
Tassinari underscored Aeffe’s decision to support the Russian market with discounts and co-marketing activities. “The macro-economic problems are hurting that area now, but we think that Russia will continue to give us great satisfaction.” Sales in Russia plunged 50.8 percent, representing 3.6 percent of the total, “due to current difficulties of the domestic economic situation,” the executive said.
“These choices affected our profitability but had positive effects on the financial expenses, which halved compared with the first semester last year, totaling 1.7 million euros [$1.9 million].” Tassinari also pointed to the improvement of Aeffe’s rating with banks.
Investments in retail and staff for the new Moschino boutiques in Los Angeles and in Milan also impacted the bottom line. A new Moschino store in New York, in SoHo, will open Sunday, Tassinari said.
Sales in the U.S. climbed 37 percent to 9.7 million euros, or $ 11.3 million, accounting for 7.6 percent of the total. “The feedback from the U.S. is very positive, both in terms of sell-in and sell-out. There are excellent prospects,” Tassinari said.
In the period, revenues in Italy rose 8 percent to 57.1 million euros, or $66.8 million, representing 44.4 percent of consolidated sales. Sales in Europe rose 0.8 percent to 28.6 million euros, or $33.4 million, accounting for 22.3 percent of the total.
Japan was up 20.6 to 3.8 million euros, or $4.4 million, representing 3 percent of the total.
In the rest of the world, revenues rose 23.7 percent to 24.6 million euros, or $28.7 million, amounting to 19.1 percent of the total, led in particular by a strong performance in Greater China, which posted 67.8 percent growth.
Tassinari underscored the importance of the growth in accessories. “This is in accordance with our strategy, ever since we went public in 2007.” Moschino accessories have grown to account for 25 percent of sales from 5 percent, he noted. Tassinari said Aeffe is also working on developing Alberta Ferretti’s accessories, focusing on the high-range demi couture line.
As of June 30, net debt stood at 98.1 million euros, or $114.7 million, compared with 89.9 million euros, or $123.1 million, at the end of June last year.
Dollar amounts were converted at average exchange for the periods to which they refer.