November 14, 2012 12:11 am

Italian luxury brands see mixed earnings

Salvatore Ferragamo has bucked the earnings slowdown seen across much of the luxury industry sector in recent months, with the Italian accessories brand citing purchases by wealthy tourists as the key driver of sales in 2012.

The company announced a net profit of €84.7m for the first nine months of this year, up 8 per cent on a like-for-like basis. Global sales revenue rose 19 per cent to €832.6m, with purchasing power in Europe particularly strong despite ongoing economic uncertainty in the eurozone and in Ferragamo’s home market of Italy.

Third-quarter sales in the recession-hit region grew by 16 per cent, as wealthy travellers from the emerging markets continued to spend and holiday in Europe, the brand said on Tuesday.

While management at Ferragamo remained upbeat about the company’s growth prospects, a slowing Chinese economy meant a disappointing like-for-like increase of 6 per cent in the Asia Pacific region in the last quarter.

“The present and near future Chinese market perspective is challenging but improving,” said the group’s management team, who have invested heavily in retail operations in the region over the past 18 months.

However, fellow Italian luxury leather label Tod’s failed to fare as well on home turf, reporting a 14 per cent sales decline in the Italian domestic market in the nine months to the end of September, thereby missing analysts’ forecasts.

A weaker third quarter at Tod’s had been predicted by industry observers given the exposure to wholesale sales, which have been at the mercy of Italian market fluctuations.

Wholesale sales, controlled by third-party partners and not by the brands themselves, have been compromised by delayed payments, retail slowdown and margin erosion. A stronger fourth quarter was expected thanks to the gift-giving season.

Tod’s shares closed down 6.3 per cent at €88 a share.

Fellow accessories-focused luxury brands such as Mulberry and Burberry have also been hit by a slowdown in spending, particularly in mainland China by aspirational customers feeling the pinch from the country’s economic deceleration.

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