The Salvatore Ferragamo Group recently approved the Interim Financial Report for the period ending 30 June 2023. And the accounts are down sharply.
In the first six months of 2023, the company recorded a Net income of 21 million euros, scoring a 65,4% decrease compared to the same period of 2022. Revenues amounted to 600 million euros, marking a decrease of 4,8% compared to the same period of the previous year, and a reduction of 7,2% at constant exchange rates. This decline occurred "in a phase in which the company is accelerating in the creative transition and continues to optimize the wholesale and retail channels", reads the note. Although the results are declining, the title Ferragamo goes up by 1,45% on the Stock Exchange when the Ftse Mib is essentially flat +0,03%.
Il gross margin experienced a slight increase to 72,2%, indicating a focus on sales quality and detailed attention to channels, methods and products.
The operating result (EBIT) recorded a significant decline, falling to 47 million euros, representing a decrease of 50,8% compared to 95 million in the first half of 2022. This decline is partly attributable to planned investments, mainly in communication. Ebitda stands at 134 million euros (-25,6%).
The financial position, in terms of net liquidity, was 278 million euros, compared to 309 million as at 30 June 2022.
Sales down in Asia and North America, the EMEA area did well
The net sales in the channel retail distribution as of June 30, 2023 are decreased by 5,9% compared to 2022 (-4,5% at constant exchange rates). This decrease was mainly caused by the US market slowdown and closures planned as part of the strategic plan, although EMEA and Greater China reported positive results.
In the channel Wholesale, net sales as of June 30, 2023 are dropped by 13,3% compared to 2022 (-14,3% at constant exchange rates), due to a planned rationalization of the distribution network, especially in the United States, and the delay in the recovery of Travel Retail. However, the EMEA area showed a positive performance.
In the first half of 2023 there were significant changes in the various geographical areas:
- Asia Pacific: Showed a 12,9% decline in net sales, a decrease of 10,4% at constant exchange rates. Performance was detracted from the weak situation in Korea and in the Travel Retail channel, but the Retail channel in Greater China reported positive results.
- Japan: decline of 11,4%, which eases to -3,8% at constant exchange rates compared to 2022.
- EMEA: here there is an increase of 10,8% in sales, with a growth of 10,9% at constant exchange rates. Both channels contributed to this positive performance.
- North America: significant decrease of 17,3%, which widens to -18,6% at constant exchange rates compared to 2022. This decrease was mainly driven by a proportionally greater reduction in the Wholesale channel, linked to the rationalization of the distribution network .
- Central and South America: In this area, sales remained substantially stable, with a modest increase of 0,4% compared to 2022. However, considering constant exchange rates, there was a decrease of -7,3%.
“In line with our plans, in this first part of the year we have made important progress in the execution of our strategic priorities. In particular, we have focused on operational improvements and on brand initiatives to support a new proposal in line with the aspirations of our customers and we continued the activities aimed at optimize the retail network and the wholesale channel. We are pleased with the first results of the products designed by our creative director, Maximilian Davis. The new products still represent a very small part of the total offer and therefore have yet to contribute significantly to the overall sales performance which reflects, at this stage, the acceleration of the transition from the previous creative course, as well as our constant attention to quality sales and distribution network. In the continuation of the year, the increase in the proportion of new products, the investments in marketing and communication and the continuous improvement of the experience in stores and on the online channel, will contribute to strengthen the brand image and generate interest from existing and new customers. While aware of an increasingly uncertain market context, the choices and the work carried out reinforce the commitment to our strategic priorities and the confidence in our medium-term ambitions ”commented she, Marco Gobbetti, Chief Executive Officer and General Manager of Salvatore Ferragamo.
Ferragamo: analysts' opinions
Analysts Equity, in the light of the published accounts, cut their 3 turnover estimates by 2023%, to 1,21 billion euros, taking into account a 7% drop in sales in the third quarter and then an 11% recovery in the fourth quarter . Experts also cut forecasts for EBIT by 8% to $77 million. Similar cuts were also applied for subsequent years. Thus the price target was lowered by 6% to 17 euros per share, but the recommendation remained positive ('Buy'), on the bet that the next autumn-winter collections will favor an itrend reversal in the fourth quarter. Moreover, this reversal could lead to an acceleration of profits in 2024, in a context of normalization of growth in the sector.
However, the experts are more cautious Intermonte, who confirmed a rating of 'Neutral' and cut the price target to 14,1 euros from 14,4 euros, in order to reflect the cut to the 2023 sales estimates of 2,5% and those of 2024 of 3,5%. Also Intesa Sanpaolo recommends caution ('Hold'), indicating a price target of 14,5 euros. Experts believe that the relaunch of the company is underway, but that for now the visibility on the results of the operation is scarce. In the end Mediobanca has revised the price target at 13,7 euros, a much lower level than the current quotations. However, the experts appreciated the steps taken by management and believe that the weakness in sales, both on the wholesale and retail fronts, are due to a review and optimization of the distribution network, aimed at seeking better quality.
