May 12, 2016
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Salvatore Ferragamo appoints former Furla CEO to lead group

May 12, 2016

Italian luxury goods group Salvatore Ferragamo said it appointed as new chief executive former Furla head Eraldo Poletto, credited for a doubling of sales at the accessibly-priced handbag maker in the last five years.

Ferragamo on Thursday posted a larger-than-expected 5 percent rise in first quarter core profit but weak markets in Europe and Asia pushed revenues down 2 percent to 321 million euros, both at constant and current exchange rates, just below a Thomson Reuters forecast of 326 million euros.

Eraldo Poletto

Chairman Ferruccio Ferragamo told analysts that Poletto would take over from Michele Norsa, who has led the Florence-based group since 2006 and who is leaving for personal reasons, on August 2..

Since listing in 2011 Ferragamo shares have doubled in value. However, the stock is down 9 percent this year as the luxury industry grapples with slower economic growth in China, plunging oil prices and security threats that have hurt tourism.

Revenues fell 3 percent in Asia Pacific, the biggest market for Ferragamo, hit by ongoing weakness in Hong Kong and Macao although Japanese sales grew pushed by Chinese tourist spending.

The brand, which has many shops in airports, said sales in Europe fell 4 percent in January to March due to fewer tourists.

Outgoing CEO Norsa told analysts April was showing an improvement in comparable store sales after a drop in the first quarter. But he added, "the market it still volatile and it is difficult to gauge performance for the first half of the year."

Looking ahead, Norsa said Ferragamo would focus on increasing profitability rather than on raising sales, in order to maintain the brand's positioning.

To cut costs, the group is trying to lower shop rents, especially in China, and Norsa said that lease renegotiations would lead to savings in "high single digit millions".

Despite falling revenues, Ferragamo reported higher earnings before interest, tax, depreciation and amortisation (EBITDA) of 64 million euros (51 million pounds) in the first three months of the year, topping a 60 million euro analyst estimate.

The EBITDA margin rose to 20 percent of revenues from a previous 19 percent.

Poletto is leaving family-owned Furla, where he has been since 2010, as it takes first steps towards a listing on the Milan bourse, expected in 2017.

$1 = 0.8785 euros


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