CEO Exits Salvatore Ferragamo on High Note

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MILAN — Salvatore Ferragamo is “back on positive territory,” showing “a remarkable” set of results and returning to the black in the first half of the year, said chief executive officer Micaela le Divelec Lemmi on Tuesday, noting that she was leaving a company that “is ready for new challenges, with a positive track record after the COVID-19 storm.”

The executive is set to exit the Florence-based company on Wednesday, to be succeeded some time next year by Marco Gobbetti, Burberry’s current CEO. On her last call with analysts and the press, she was clearly pleased to be able to report that Ferragamo in the six months ended June 30 registered a net profit, including a minority interest, of 33 million euros. This compares with a loss of 86 million euros in the same period last year.

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“I leave the company clean and healthy for new developments,” said le Divelec Lemmi, a Gucci veteran who first joined Ferragamo as chief corporate officer and was named CEO in 2018.

In the first half, revenues climbed 44.2 percent to 524 million euros, compared with 363 million euros in the same period last year, despite the ongoing restrictions on international travel and lockdowns in some countries due to the pandemic. Sales in the second quarter of 2021 rose 91.3 percent.

Asked by one analyst to elaborate on the timing of Gobbetti’s arrival, executive vice chairman Michele Norsa, who was granted all powers of ordinary administration in the transition, said he could not disclose more details except to say that Burberry confirmed Gobbetti will leave at the end of the year, and that it was “too early to talk about future plans.”

Ferragamo will have a new organization at the beginning of 2022, he continued, noting that, in addition to a new chief operating officer arrived in July, the company will reveal the appointments of new CEOs in charge of the Europe, Middle East and Africa and North America regions in coming months.

Le Divelec Lemmi was supposed to remain CEO of the company until Dec. 31, 2023.

While thanking le Divelec Lemmi “not only on behalf of the company,” but also expressing “very strong personal appreciation for her continuous support, commitment and professionalism over the past 14, 15 months working together,” he responded to a question about the choice of Gobbetti.

Underscoring the extensive search before the final selection, he said it was “nice to have a person that will develop the company for the long term,” touting Gobbetti’s experience in the fashion and luxury sector and in running a public company. “With the best team of professionals, I hope and believe he is the person for the future development of Ferragamo,” Norsa opined.

Turning to the numbers, he also emphasized the “very encouraging” figures, pointing out that the company has been “going through an articulated evolution process that will be completed at the beginning of next year.”

He highlighted the very strong efforts of management in turning around the company, focusing on improving margins, streamlining operations and cost monitoring. Both Norsa and le Divelec Lemmi touted an improved sales mix at full price, growth in all product categories, and geographies and especially in high margin regions such as North America, China and South Korea, which were major contributors.

Le Divelec Lemmi said Ferragamo had taken concrete actions to focus on its customers.

In the first half, earnings before interest, taxes, depreciation and amortization amounted to 144 million euros, compared with 32 million euros in the same period last year.

Operating profit totaled 66 million euros, compared with an operating loss of 72 million euros.

As of June 30, the group comprised 639 points of sales, including 398 directly operated stores and 241 third-party-operated stores.

In the first half, retail sales rose 46.3 percent to 381.3 million euros, representing 72.8 percent of the total. In the second quarter, retail revenues climbed 81.4 percent with Greater China, North America, Latin America and South Korea exceeding pre-COVID-19 revenues level.

The direct e-commerce channel continued to grow, showing a 70.6 percent gain.

The wholesale channel was up 41.1 percent to 138 million euros, accounting for 26.4 percent of the total.

In the second quarter of 2021, wholesale revenues soared 134 percent compared with the same period last year, despite the ongoing challenges of the travel retail channel.

Both le Divelec Lemmi and Norsa underscored the relevance of China, which was up 30 percent at full price compared with 2019. Mainland China accounted for 25 percent of the company’s business, said chief financial officer Alessandro Corsi.

In the first half, the Asia Pacific area was confirmed as Ferragamo’s main market, with sales up 35.2 percent to 222.2 million euros, accounting for 42.4 percent of the total.

In the period, the retail channel in Greater China posted revenue growth of 45 percent at constant exchange rates. In particular, the retail channel in China posted an increase in revenues of 47.4 percent and South Korea also posted a 21.9 percent growth.

“We are confident in [South] Korea and China even if some COVID-19 measures impacted the stores’ operations in August,” Norsa said. “China has been the stronger driver for growth for Ferragamo in the past and [will be so] in the future.”

Le Divelec Lemmi saw an acceleration in China and the U.S. at the end of July, but admitted there were some signs of “rebalancing purchases in China after last year’s revenge spending.”

Norsa said he believes that “the West misunderstood some of China’s President Xi Jinping’s comments [on the redistribution of wealth]. Prosperity is still the main focus of the current leadership. [The president] referred to excessive wealth [obtained] too fast, and a redistribution to a larger and middle class will lead to even bigger demand for premium quality,” he contended.

Norsa said he was more concerned about possible and preliminary COVID-19 restrictions leading up to the Olympic Games in Beijing next year.

Sales in Japan rose 13.4 percent to 41 million euros. In particular, second-quarter sales in the region jumped 55 percent compared with the second quarter last year.

Overall, the Asian continent represented more than 50 percent of the group’s total revenues in the first half.

The Europe, Middle East and Africa area was still penalized by the lockdowns of stores and mainly by the limited tourists flows in the first half, posting a 22.2 percent increase in sales to 96.1 million euros, accounting for 18.4 percent of the total. “We are looking at a recovery but it will take some time to return to business as usual,” Norsa said.

Sales in North America were up 103 percent to 137 million euros in the first half, accounting for 26.2 percent of the total. Norsa touted the “very strong and positive performance, with a wide distribution not only in main capitals having recently opened stores in Aventura Mall in Florida, in California and Texas.” In the second quarter, revenues more than quintupled compared with the second quarter last year.

Revenues in the Central and South America grew 65.6 percent to 27.4 million euros in the first half.

Sales of footwear were up 40 percent to 223.2 million euros, accounting for 42.6 percent of the total, while leather goods amounted to 235.4 million euros, up 48.5 percent and representing almost 45 percent of sales. Apparel grew almost 53 percent to 29.2 million euros.

Corsi noted that all performance measures were reported excluding the fragrance business both from the data relating to 2021 and from the 2020 comparative data, following the exclusive licensing agreement to Inter Parfums Inc., for the worldwide production and distribution of Ferragamo brand perfumes as reported in July.

As reported, the fragrance license will last for an initial term of 10 years and marks a turning point for Ferragamo’s beauty business as its fragrance division was managed in-house for the last two decades. To ensure the continuity of the Made in Italy production and the highest level of synergies with the fashion house, Inter Parfums will operate the Ferragamo fragrance business through a wholly owned company based in Florence.

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