Salvatore Ferragamo posted a 1.7 percent year-on-year decline in first-quarter sales to €303.9 million. But, at constant-currency rates, quarterly sales rose by 1.7 percent, with the wholesale business performing slightly better than the company's stores in Europe.
On a global basis, the company's sales of footwear declined by 5.3 percent in the quarter to €123.5 million, and they were down by 1.6 percent in terms of constant currencies. Sales of handbags and other leathergoods went up by 3.7 percent in euros to €116.2 million, and they advanced by 6.8 percent in local currencies. On aggregate, the two categories represented 78.8 percent of total sales, up from 78.4 percent a year earlier, while the share of apparel declined.
Globally, the company's retail sales decreased by 3.6 percent to €191.9 million and fell by 0.2 percent at constant currency rates, but they rose by 0.3 percent on a comparable store basis. At the end of March, the group had a network of 678 mono-brand stores, down slightly from 674 a year earlier and 685 at the end of 2017.
The number of directly-operated stores (DOS) totaled 406, up from 399 a year earlier but down from 410 three months earlier. A further 272 points of sale were run by third parties (TPOS), down from 275 both a year earlier and at end 2017.
Wholesale was up by 2.6 percent to €106.9 million. At constant currency rates, the wholesale business grew by 5.9 percent with the travel retail channel up by a double-digit rate.
Overall revenues rose in Europe by 1.4 percent to €78.2 million, driven by the wholesale channel. At constant currency rates, the overall top line in Europe was up by 1.9 percent.
In North America, revenues dropped by 6.1 percent to €65.4 million, but they rose by 2.4 percent in local currencies, with the retail channel up by a double-digit rate and wholesale revenues penalized by the poor performance of the brand in department stores.
In Latin America, sales dropped by 8.3 percent to €16.0 million. On a currency-neutral basis, they dipped by 1.4 percent.
In Japan, the brand's sales declined by 6.3 percent in reported euros to €29.7 million. In yen, they fell by 8.0 percent due to the rationalization of the wholesale channel. In the rest of the Asia-Pacific region, the turnover increased by 1.2 percent to €114.5 million. Currency-neutral sales rose by 4.6 percent, with Hong Kong up by 34.1 percent and retail sales in mainland China stable after rising 18.1 percent last year. The trend in South Korea was still weak.
Ferragamo's gross profit margin narrowed to 62.3 percent from 63.6 percent due to an unfavorable channel mix and a negative impact from foreign exchange rates. The operating profit was virtually unchanged at €17.1 million against €17.0 million a year earlier, as operating costs were cut by 3.9 percent to €172.4 million. But, net income went down by 18.8 percent to €8.9 million due to higher financial expenses and an increased tax burden stemming from the fiscal reform passed late last year in the U.S.
The company cut its net working capital by 11.4 percent to €286.1 million as inventories were reduced by 6.4 percent to €359.2 million. Investments fell to €9 million in the first quarter from €13 million a year earlier. The cash pile grew to €141 million at the end of March from €47 million a year earlier.
During the conference call with financial analysts, the executive chairman of the company, Ferruccio Ferragamo, warned that the company still has “a lot to do” for its relaunch and is focusing on its reorganization, combined with cost containment. An investment broker, Equita, forecasts that Ferragamo's full-year revenue will only go up by 1-2 percent at constant currency rates.