After its previous weakness, Salvatore Ferragamo posted more convincing first-quarter results as its sales rose by 4.3 percent, both a current and constant exchange rates, to €317.1 million, beating market expectations by over €2 million.
The gross margin rose to 63.3 percent in the first quarter from 62.3 percent a year earlier, while the adjusted Ebitda margin was steady at 10.7 percent of sales and the adjusted Ebit margin slipped to 5.3 percent from 5.6 percent, as Ferragamo's adjusted operating expenses went up by 6.6 percent to €183.7 million, but the management is projecting improved margins as compared to 2018. Net profit after minority interests rose by 10.8 percent to €10.2 million.
The most encouraging data was a 2.2 percent rise in comparable retail sales after 10 consecutive quarters of decline. The data pushed the company's shares up by nearly 10 percent on the day when the sales results were reported.
In the first quarter, the company's total retail sales grew by 3.9 percent year-on-year to €199.3 million, or by 3.2 percent at constant currency rates.
At the end of March, Ferragamo had a network of 662 mono-brand stores, against 672 at the end of 2018. The number of directly-operated stores (DOS) was down to 398 from 409 at the end of December. A further 264 points of sale were run by third parties (TPOS), one more than three months earlier. The company does not expect a significant change in its distribution network in the medium term.
Meanwhile, wholesale revenues increased by 5.5 percent to €112.8 million, or by 7.0 percent in local currencies, driven by double-digit growth in the travel retail channel.
Globally, Ferragamo's footwear sales were up by 7.0 percent to €132.2 million, with constant-currency sales up by 7.3 percent. Handbags and other leathergoods grew by 8.4 percent at current exchange rates to €125.9 million, and advanced by 8.7 percent in local currencies. Shoes and leathergooods increased their combined share of total sales to 81.4 percent from 78.8 percent a year earlier.
By region, Ferragamo's overall revenues in Europe, the Middle East and Africa (EMEA) jumped by 2.8 percent at both current and constant exchange rates, reaching a level of €80.4 million thanks to positive trends both at retail and wholesale.
In North America, revenues dropped by 0.1 percent to €65.4 million, and they were off by 0.7 percent in local currencies.
In Asia-Pacific, excluding Japan, the turnover rose by 7.2 percent to €122.8 million. Currency-neutral sales were up by 7.9 percent, with Chinese retail sales up by 17.7 percent. Ferragamo noted that the Chinese are its main customers and that their demand for the company's products is increasing among younger people, as thought.
In Japan, sales were up by 2.1 percent both in euros and in yen to €30.3 million, lifted by the retail and wholesale channels. In Latin America, sales surged by 13.8 percent to €18.2 million, and they rose by 12.0 percent on a currency-neutral basis.
On an adjusted basis, Ferragamo had a net cash position of €179 million at the end of March, up sharply from €141 million a year earlier. But under new accounting standard, it had a net debt of €486 million at the end of March 2019.