Morningstar | Ferragamo Performance Improves in 3Q, Fragrances Especially Strong; Shares Pricey
We maintain our fair value estimate of EUR 15.80 per share for Salvatore Ferragamo as the company reported better-than-expected revenue (decline of 3.3% versus 4.3% our annual expectations) but weaker profits for the nine months of 2018 (operating margin of 10.5% versus 12% we expected). In the third quarter revenue increased 2.5% at constant exchange rates with 1.4% currency tailwind. We continue to view shares as expensive with eventual brand performance improvement priced in but far from certain.In the third quarter sales trajectory improved across markets. European sales dropped by 5.2% (down 6.3% in the first half), sales in North America declined by 1.2% (down 1.4% in the first half) with positive retail performance but continuing drag from wholesale channels, and the Japanese market dropped by 1.7% at constant exchange rate (down 4.8% in the first half). Asia-Pacific region sales were stable in the nine months at constant exchange rates (negative 2.7% in the first half). Central and South America grew by 3.3% at constant exchange rates (0.5% growth in the first half).
Among product categories, the core footwear continued to struggle with a 4.3% decrease in nine months, while leather goods and fragrances showed positive performance with 3.4% and 4.2% growth in constant exchange rates, respectively. While footwear and leather goods sales showed an improving trend in the quarter, apparel and accessories further deteriorated. Fragrances was a standout category this quarter as it grew by 4.2% in constant currencies for nine months versus constant currency decline of 8.9% in the first half of the year.
Gross margin was adversely impacted by negative currency impact in the first half of the year, improving by 80 basis points in the third quarter. Operating costs increased, providing negative leverage against declining sales.
Salvatore Ferragamo creates, produces and sales goods for men and women: footwear, leather goods, apparel, silk goods, jewels, other accessories and fragrances. as well as eyewear and watches manufactured under license by third parties. Co. sells its products through: a network of single Salvatore Ferragamo brand stores, managed both directly and by third parties; and presence in department stores and multibrand specialty stores. Co.'s fragrances product category involves the creation, development and production of fragrances and related products under the Salvatore Ferragamo brand. Co. is also active in the licensing of the Salvatore Ferragamo brand and in real estate management.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.