Key Takeaways
Salvatore Ferragamo SpA shares plunged nearly 15 percent after the Italian luxury group reported first-quarter revenue fell 1.2 percent at constant exchange rates, missing expectations and showing no signs of accelerating growth.
"The company showed solid trends at the start of the year, in line with the sector average, but without a sequential acceleration unlike its peers," Paola Carboni, an analyst at Equita SIM, said in a note.
The Florence-based company's revenue for the three months ended March 31 was 209 million euros ($244.9 million), down 5.5 percent at current rates. The performance was dragged down by a planned 19 percent revenue decline in the wholesale channel as Ferragamo pivots to its direct-to-consumer (DTC) business. The DTC channel posted a 5.5 percent sales increase at constant currency, driven by double-digit growth in the Americas.
The results expose a growing bifurcation in the global luxury market. While top-tier brands like Hermès and Chanel are posting record sales in key markets, others are struggling. In Korea, a rare growth market, the top three French luxury houses saw combined revenue of nearly 5 trillion won, while Ferragamo's sales have consistently declined. This divergence puts pressure on second-tier brands to prove their strategic shifts can deliver growth in a market flocking to established leaders.
By region, North America was the only bright spot, with sales climbing 18.8 percent at constant currency. The company is prioritizing the region with new stores and targeted customer initiatives. In contrast, sales in the Asia-Pacific region fell 5.4 percent, and Japan dropped 4.4 percent, both at constant rates, hurt by a lack of Chinese tourists and a strategic cleanup of wholesale accounts in China.
By product, sales of footwear, the company's largest category, were down 3.4 percent to 89 million euros. Leather goods fell 5.8 percent at constant currency to 85.1 million euros.
The sharp decline in the wholesale business reflects a deliberate strategy to increase brand exclusivity and focus on higher-quality distribution. The company stated it has been aggressively cutting accounts, particularly in the Chinese market, to halt transshipment activities.
The results place further scrutiny on Ferragamo's turnaround plan, which is being overseen by executive chairman Leonardo Ferragamo following the departure of CEO Marco Gobbetti last March. The company has not yet named a permanent replacement. Investors will watch for the appointment of a new CEO and whether the brand's focus on direct sales can successfully elevate it into the top tier of luxury.
This article is for informational purposes only and does not constitute investment advice.
