Morningstar | Ferragamo's Preliminary Results in Line With Our Estimates; Fair Value Estimate Maintained
We are maintaining our fair value estimate of EUR 15.8 for no-moat Salvatore Ferragamo as the company reported preliminary annual results largely in line with our forecasts. Revenue was 3.4% lower (versus the negative 4.3% we anticipated) with a 1.7% decline at constant currencies (versus the 1.3% decline we expected). We view shares modestly overvalued at current levels, trading in 3-star territory.Geographically, Asia-Pacific was the only region to record an increase of sales in constant exchange rates, with 0.8% growth and strong performance in Greater China, as Chinese luxury demand is repatriated to the home market. EMEA was down 5.9% at constant exchange rates, affected by declines in wholesale business and commercial partner change in the Middle East. North American sales dropped by 2.4% at constant exchange rates with negative trends at department stores. Japan continued to be impacted by rationalization of wholesale channels and declined by 1% at constant exchange rates.
Handbags and leather accessories performed well with 2.6% and 6.5% year-over-year growth, respectively. Footwear, Ferragamo’s biggest division, posted a 3.9% decrease in 2018, although it saw some improving trends in retail in the fourth quarter. We will be looking forward to more information as the company reports annual results on March 12, 2019.
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.
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