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Salvatore Ferragamo Reports Decline in 2023 Sales, Profitability, but CEO Marco Gobbetti Touts Good Progress

MILAN — Last year was one “of intense work,” according to Marco Gobbetti, chief executive officer and general manager of Salvatore Ferragamo, and a period during which “good progress was made” in the company’s strategic priorities in terms of brand, product, communication and network.

During a call with analysts on Wednesday, Gobbetti underscored that the quality of sales has improved, the brand has been strengthened and there were “pleasing results from new products,” but he admitted “the timing of our initial assumptions” was impacted by the current market backdrop and “softening luxury demand,” witnessed especially in the second part of last year. As reported, in 2022, Gobbetti said he was aiming to double Ferragamo’s revenues in four to five years.

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In 2023, Ferragamo revenues were down 7.6 percent to 1.15 billion euros, compared with 1.25 billion euros at the end of December 2022. At constant exchange rates, sales decreased 8.1 percent.

In the 12 months ended Dec. 31, net profit more than halved, falling almost 60 percent to 26 million euros compared with 65 million euros in 2022.

Despite last year’s declines, Gobbetti said that in 2024 the company will “continue to fuel” its growth ambition and “work on the full deployment of the offer, enhancing storytelling, accelerating the rollout of the new store concept, while maximizing the potential of all digital touch points and focusing on the quality of sales.”

There is no intention to cut back on investments and communication “while also protecting profitability through ongoing attention to the quality of sales with a better mix and less discounts and a disciplined focus on costs.”

Last year, investments in marketing and communication rose 23 percent at 9.8 percent of sales, from 7.4 percent in 2022.

As of Dec. 31, capital expenditures amounted to 72 million euros compared with 56 million euros in 2022, mainly focusing on the renovation of the retail network.

During Milan Fashion Week last month, Ferragamo unveiled a new store concept at the women’s boutique in Via Montenapoleone, extensively refurbished, according to a blueprint by architect Vincent Van Duysen.

“We’ve had tremendous feedback about the store, the transformation is aligned with the new aesthetics and different perception of the brand and we saw quite positive sales,” said Gobbetti. “It’s quite encouraging and we are confident we are in the right direction.” About 20 new stores will open this year.

He touted creative director Maximilian Davis’ aesthetic, which contributed to higher brand visibility and heat, translating into a strong increase in editorial coverage, celebrity engagement and social media response, and leading to his award as British Womenswear Designer of the Year in December.

In 2023, retail sales decreased 10.8 percent to 824.2 million euros, representing 71.3 percent of the total, dented by a general weakening in the demand for luxury in the last months of the year. The company implemented more than 70 store refreshes, and closed 15 stores considered not significant. The same amount will likely be closed in 2024. The company also completely renewed its website.

The wholesale channel registered a 12.2 percent fall in sales  to 295.3 million euros, partly due to reduced international travel affecting the duty-free channel and the softening of the U.S. market, said Gobbetti. In addition, the channel was penalized by a planned rationalization in the number of stockists.

In 2023, earnings before interest, taxes, depreciation and amortization fell 15.8 percent to 252 million euros, compared with 299 million euros in 2022. Operating profit sank 43.7 percent to 72 million euros, compared with 128 million euros a year before, reflecting the planned higher investments, mainly in marketing and communication.

Responding to a question, Gobbetti reiterated that his strategy has not changed since his arrival 18 months ago, and includes the “renewal and recruitment of new customers, young but not only, the product renewal, which is the foundation of the strategy and we are in a good final phase.” Again, he cited the resonance of Davis’ “modern elegance, his colors and specific silhouette that has a place in today’s society.”

Asked about current trading, the executive said that the beginning of the year was “still volatile,” with a soft start in Asia and the U.S. in January, but seeing an improvement in February, with retail in line with last year, and a recovery in Europe, Japan and the U.S.

Last year, sales in Asia-Pacific were down 13.1 percent to 363 million euros, accounting for 32.4 percent of the total.

In the fourth quarter, sales at constant exchange rates were up 2.2 percent compared with the same period in 2022, with both channels in Greater China up double-digit.  Ferragamo completed the buy-back of the minorities in the joint ventures in Greater China, which Gobbetti explained, allows for “more flexibility in the implementation and acceleration of our strategies in a key market.”

Sales in Japan fell 12.6 percent to 86.6 million euros. At constant exchange rates, revenues were down 3.7 percent.

The Europe, Middle East and Africa region reported a 3.4 percent increase in sales to 270.6 million euros despite a reduction of the perimeter in both channels, in a context of soft local demand and tourism spending still below pre-COVID-19 levels. This market represented 24.2 percent of the total.

North America showed a 19.3 percent decrease to 315.9 million euros, accounting for 28.2 percent of the total.

Sales in Central and South America were down 7.2 percent to 83.4 million euros, partially impacted by a reduction of perimeter.

By categories, sales of shoes fell 9.3 percent to 511.8 million euros, representing 45.7 percent of the total.

Leather goods were down 14.1 percent to 451.2 million euros, accounting for 40.3 percent of sales. Ready-to-wear decreased 12.1 percent to 73.5 million euros and silk was down 3.8 percent to 83 million euros.

The net financial position was positive, amounting to 224 million euros, but this compared with 371 million euros at the end of December 2022, including the acquisition of the minorities stakes in the Greater China joint ventures. Net debt stood at 486.6 million euros, compared with 204 million euros.

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