Mar 18, 2016
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Ferragamo cautious after 2015 core profit beat

Mar 18, 2016

Italian luxury goods maker Salvatore Ferragamo reported a larger-than-expected 11 percent rise in core profit for 2015 but expressed caution on the outlook for 2016 after a soft start to the year.

Chief Executive Michele Norsa told analysts on Thursday like-for-like sales in the first two months broadly matched last year's 3 percent drop.

"The start of the year has not been particularly good," he said, pointing to a double-digit drop in sales in Hong Kong.

"I'm more confident on mainland China where we're seeing a better performance."

A brusque economic slowdown in China has dampened the outlook for luxury brands and Asia Pacific is the biggest market for the Florentine shoemaker.

Ferragamo's 2015 earnings before interest, tax, depreciation and amortisation totalled 324 million euros (253.4 million pounds) last year, above a Thomson Reuters SmartEstimate of 314 million euros. The EBITDA margin rose to 22.7 percent of revenue from 22 percent.

Asked whether the group was comfortable with current market expectations for 2016, Chief Financial Officer Ernesto Greco said that "consensus is probably something we have to explore month after month."

Ferragamo reported in January a 7 percent rise in 2015 revenues to 1.43 billion euros as currencies helped offset weakness in Asia and the United States. Revenues rose 1 percent at constant exchange rates.

Norsa said trends in the United States were little changed. In a more positive note, he echoed comments from rival Tod's (TOD.MI) about Italy doing better than expected. France, on the contrary, continued to suffer after last year's Paris attacks.

The CEO said Ferragamo would strive to improve sales of shoes after they fell 1 percent at constant currencies last year.

"Our focus will be on shoes which is our core business," he said. "We have something in mind: we could increase awareness, visibility and also probably price positioning."

Norsa said the group expected to save money this year by renegotiating shop rents. Shop openings would likely be fewer than last year when it added 15 new directly-operated stores.

Ferragamo expects a near-zero impact from currency hedging in the full year 2016 after a 51 million euro hit last year, its CFO said.


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