Jan 31, 2014
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Ferragamo's 2013 sales growth slows in main market Asia

Jan 31, 2014

MILAN, Italy - Italian upmarket leather group Salvatore Ferragamo saw sales growth slow in 2013 in Asia, its most important market, like other luxury firms whose previously stellar rises in turnover there have moderated.

Ferragamo said on Thursday global revenue rose 9 percent to 1.26 billion euros ($1.7 billion) in 2013, in line with forecasts from analysts who expected last year's 17 percent growth rate to ease.

Ferragamo SS14 | Source: Salvatore Ferragamo

In Asia, where the group makes more than a third of its sales, the rate of revenue growth dropped to 10 percent from 18 percent in 2012.

The deceleration Ferragamo witnessed in Asia comes a day after fellow Italian shoemaker Tod's reported full-year 2013 sales that were below market expectations, reflecting a slowdown in the Chinese market.

Chinese luxury consumers make up about one third of the global market, but changing consumption habits including more shopping abroad and a crackdown on gifts to public officials have crimped sales for luxury companies in the country.

"It feels like we are at an inflection point in China for some Italian luxury players like Tod's and Ferragamo that have historically outperformed in that key market," said Credit Suisse analyst Guillaume Gauville.

An increase in European sales of 13 percent at constant exchange rates was supported by tourist purchases, Ferragamo said.

Worldwide sales through wholesale clients, and the outlets in airport and railway stations which Chief Executive Michele Norsa expects to support growth in 2014, rose 14 percent last year over 2012.

Luxury brands usually make most revenue from stores they control directly, but Ferragamo's like-for-like retail sales rose more slowly than its wholesale revenue and their growth decelerated to only 1 percent in the fourth quarter from 7.8 percent in the final quarter of 2012.

"They particularly need to reaccelerate like-for-like sales growth in their own stores to above 5-6 percent in the next four to five years to get the operating leverage the market is currently expecting," said Credit Suisse's Gauville.

Ferragamo shares rose 60 percent over the course of 2013 but have fallen almost a fifth so far this year, as Italian luxury stocks have suffered from concerns about slowing sales growth, moderating demand in China and sky-high valuations.

Shares in Tod's shed more than 7 percent and were temporarily suspended from trading on Thursday after its sales announcement but one analyst said the same was unlikely to happen to Ferragamo.

Ferragamo's shares closed down 1.65 percent on Thursday at 22 euros, before the sales numbers were announced.

$1 = 0.7373 euros

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