Salvatore Ferragamo posted a 0.9 percent decline in sales to €1,005 million for the first nine months of this year, with currency-neutral revenues rising by 0.2 percent. The third quarter was particularly tough for the Italian company, with a drop of 5.5 percent in consolidated sales to €287 million.
Retail sales increased by 1.2 percent to €647.7 million for the first nine months, slowing down significantly from the 4.7 percent rise reported for the first half as comparable store sales dropped by 1.0 percent. At constant currency rates, the revenues of the brand's stores were up by 2.9 percent.
At the end of September, the group had a network of 687 mono-brand stores, 14 more than at the same time last year. The number of directly-operated stores (DOS) rose by 11 to 407, while a further 280 points of sale were run by third parties (TPOS), against 277 a year earlier.
Wholesale revenues went down in the first nine months by 4.7 percent at actual and constant currency rates to €339.5 million, hit by de-stocking, weakness in U.S. department stores and geopolitical tension in South Korea.
Overall nine-month revenues fell in Europe by 1.6 percent to €263.5 million, driven lower by the wholesale channel. At constant currency rates, European sales declined by 0.9 percent.
In North America, revenues dropped by 4.3 percent to €231.9 million, hit by the poor performance of department stores, but the rate of the decline narrowed to 3.3 percent in local currencies.
In Japan, sales were down by 6.7 percent to €86.7 million despite a positive performance in the retail division. In yen, revenues fell by 4.0 percent.
In the rest of the Asia-Pacific region, the company's turnover increased by 2.8 percent to €370.1 million, led by mainland China. The trend in Hong Kong remained negative. In local currencies, revenues rose by 3.5 percent in the region, with retail sales in the Chinese mainland growing by 15.5 percent.
In Latin America, sales rose by 3.1 percent to €52.7 million, but third-quarter sales were affected by the earthquake in Mexico. On a currency-neutral basis, revenues grew by 6.9 percent.
By product, global footwear sales were down by 1.2 percent to €432.4 million, with a rise in constant currencies of 0.1 percent. Sales of handbags and other leathergoods declined by 0.6 at current exchange rates to €367.4 million, but grew by 0.3 percent in local currencies. On aggregate, the two categories represented 79.6 percent of total sales against 79.7 percent a year earlier. Reported sales went down by 0.9 percent for apparel and up by 3.2 pecent for fragrances.
The gross profit margin dropped to 64.2 percent from 67.0 percent as the group used secondary channels to clear up its inventories. Meanwhile, operating costs rose by 4.0 percent due to the expansion of the retail network as well as some one-off expenses such as a €3 million loss on the planned disposal of Ferragamo's retail unit in India.
As a result, the Ebitda margin narrowed to 16.1 percent from 21.3 percent in the year-ago period and the Ebit margin went down to 11.5 percent from 16.8 percent. The pre-tax profit dropped by 32.6 percent to €106.4 million and attributable net income fell by a lower rate of 28.3 percent to €78.9 million, benefiting from a reduction in the tax rate to 25.8 percent from 30.3 percent thanks to the so-called “Patent Box” system (see Shoe Intelligence Vol. 19, N° 1+2).
Capital expenditure rose to €51 million from €46 million a year earlier, but inventories declined by 14.8 percent to €334.7 million. The operating cash flow rose to €219.3 million from €118.4 million a year earlier and Ferragamo registered a net cash pile of €100.4 million in September against €18.2 million in net debt a year earlier.
The group repeated that it sees 2017 as a transition period, adding that it expects 2018 to be another year of “hard work.”