Impacted by a weak performance in its wholesale and travel retail channels and sluggish sales in China, the Salvatore Ferragamo company reported a decline in first-quarter revenues. However, chief executive officer and general manager Marco Gobbetti expressed his confidence in Ferragamo’s new and refreshed product offer designed by creative director Maximilian Davis and stood by the strategy he has implemented over the past year.
In the three months ended March 31, revenues of the Florence-based luxury company were down 18.3 percent to 227 million euros compared with 278 million euros in the same period last year.
The direct-to-consumer channel reported a sales decrease of 11.1 percent to 169.8 million euros, representing 74.8 percent of the total. It was dented by a volatile consumer environment in China, as well as a tough January. February and March were in line with last year, despite weak performances in Greater China and Korea.
The wholesale channel was down 38.3 percent year-over-year to 50 million euros, reflecting a weak environment and a hard comparison base, mainly in Europe, as well as a shift in delivery timing compared with last year, Gobbetti said during a conference call with analysts at the end of trading on Thursday.
“As the wider sector continues to normalize, we are encouraged by the exit rates we are seeing in our DTC performance — most notably in Europe, U.S. and Japan — as we turn to further drive our top-line performance through an increased focus on both customer engagement and communication activities around our refreshed DTC channels,” said Gobbetti.
A new product, “a communication model focused on creating awareness for the renewed brand, a redesigned and more efficient customer experience through CRM optimization and a new store concept,” will be key elements going forward, continued Gobbetti. “We are pleased by the increased brand desirability and the rollout of the new product offer, which have gained solid recognition from media and industry.”
Gobbetti said that, although the DTC performance in China in February improved compared with January, “customers are worried” about the general scenario in that market and that April was “still volatile” while showing “a slight improvement.”
“We continue to invest along our established strategic priorities whilst protecting profitability through our ongoing attention to the quality of our sales and operating capability,” said Gobbetti.
The executive doesn’t expect margins to deteriorate in the year, but said they would “settle” and be “slightly below” the 72 percent gross margin last year. “We have almost completed the transition of products and inventory is under control.”
He added that Ferragamo has “started to create and establish iconic and evergreen products and the mix has been growing steadily in the past few months and back to the pre-transition period when around 55 to 60 percent of sales [derived] from carryovers. This is a major accomplishment; we have gone full circle in the past 12 months.” He added that flagships and stores in key cities are over-performing, “which is a good indication [they work] with more fashion savvy and new [customers]” and that handbags have been “catalysts” for business.
As reported, last month, Gobbetti was confirmed to the role of CEO and will remain in office for the term of the current board of directors ending Dec. 31, 2026. He joined Ferragamo from Burberry in January 2022, succeeding Micaela Le Divelec Lemmi. He tapped Davis in March 2022.
In the first quarter, sales in the Europe, Middle East and Africa region were down 30.8 percent year-over-year to 49.7 million euros, impacted by the wholesale business.
North America sales decreased 10.9 percent to 60 million euros, mainly impacted by a double-digit negative wholesale performance. The direct-to-consumer channel improved through the quarter, but Gobbetti said the market is “more volatile” than others.
Asia Pacific registered a 19.3 percent decrease in revenues to 73.3 million euros. Greater China and Korea, impacted by a weak consumer sentiment, reported a negative performance both at retail and wholesale, while the rest of Asia Pacific was positive, also benefiting from an increase in traveling.
Sales in Japan fell 15.7 percent to 20 million euros, but Gobbetti said the market grew “solid double digit in April,” lifted by residents and more Chinese tourists shopping in the region.
Sales in Central and South America were down 8.6 percent to 16.6 million euros.
By category, footwear sales were down 18.3 percent to 101.9 million euros and leather goods fell 18.5 percent to 87.7 million euros.
Apparel slumped 30.5 percent to 13.4 million euros, while silk products were down 17.7 percent to 16.5 million euros.
