Salvatore Ferragamo Italia SpA is preparing to enter the next phase of its life — on the stock market.
Last month the company hired Valentino SpA chief executive Michele Norsa and announced plans to go public, a move that will resolve the generational dilemma of 40-plus family members and create one of the few publicly traded fashion companies in Italy.
“Listing on the stock exchange is necessary because it requires us to be precise and disciplined,” Ferragamo chief Ferruccio Ferragamo said.
It’s still not certain when Ferragamo will make its debut on traders’ screens, but speculation in financial circles is that it could happen as soon as next year.
Fashion and luxury companies, often quick to scoff at the notion of posting quarterly growth and the prospect of accepting the market’s valuation of their businesses, are barely represented on the Milan stock exchange. Prada’s on-again, off-again IPO dance (the company pulled the plug on the idea three times) is emblematic of how hard it is to reconcile the interests of fashion and finance. Ferragamo shrugged off such concerns. “Our company is already very transparent in terms of results and numbers compared to many other companies,” he said.
The company, once one of the most reticent to release financial data, is starting to take disclosure seriously. Last month, for the first time, Ferragamo released net profit figures, providing fresh insight into the business. Net profit last year was 39.2 million euros, or $49 million, while sales climbed 12 percent, to 575 million, or $718.8 million. That momentum seems to be continuing; sales climbed 11.8 percent in the first half of this year, to 299.6 million euros, or $368.5 million.
(Dollar figures have been converted from the euro at average rates for the time periods to which they refer.)
Hervé Martin, product general manager at the company, said Ferragamo could reach the one billion euro sales mark in three to four years, an “aggressive” but not impossible target. Still, with just bottom-line and top-line figures, it’s difficult to draw up a precise valuation for the company. Current industry multiples indicate Ferragamo could be worth as much as 1 billion euros ($1.3 billion), depending on market conditions at the time of the IPO. It’s true that the longer Ferragamo waits, the more it risks facing a slowdown in the luxury goods market.
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As always, price will be key. But James Hurley, managing director and luxury goods analyst at Telsey Advisory Group in New York, said Ferragamo was an attractive company in terms of prestige, product assortment and retail structure. Ferragamo is already further along in its turnaround story than Gucci and Burberry were at the time of their IPOs in 1995 and 2002, respectively, in his opinion. He said Ferragamo needs to leverage the customer loyalty it has in the shoe business to other products and innovate to attract new and younger customers.
Martin is upbeat about the prospects for a publicly listed Ferragamo, a company he compares with another family-controlled concern, Hermès.
“Hermès sold a part of its capital on the stock market and remained a company under family control, and they managed it very well, I think,” Martin said. “The cohesion of the family remained a central element.”
Members of the Ferragamo family agree. “It’s important that the company can stand on its own two feet and have an organization that is adept for today’s world,” said Fulvia Visconti Ferragamo, vice president of Salvatore Ferragamo Italia SpA. “We have been preparing for this for years. We want to leave our kids something that was [properly] organized.”
Norsa’s appointment is another critical step in preparing Ferragamo for the stock exchange. A well-respected manager, Norsa has spent the last nine years working at Marzotto SpA overseeing its various apparel operations, including the M Missoni and Marlboro Classics brands. He became ceo of Valentino SpA in 2002, when Marzotto bought the fashion house from the now-defunct holding company HdP. Norsa’s accomplishments include introducing diffusion line Valentino R.E.D., bolstering the house’s accessories business, restoring the fashion house to profitability and playing a key role in Marzotto’s stock market spin-off of Valentino Fashion Group.
To be sure, Norsa will have a larger business to run at Ferragamo than he did at Valentino and a different product mix. While Valentino is primarily an apparel company, Ferragamo did 38 percent of its business in shoes and 31 percent in handbags and leather goods in the first six months of the year. Ready-to-wear accounted for just 14 percent of sales. Martin said that Ferragamo wants to grow its apparel sales, but not in a way that is out of proportion with the accessories business.
It’s clear Norsa’s expertise with Valentino, both in apparel and accessories, will bode well for Ferragamo. It’s unknown if he’ll look to shake up the women’s design office, which has struggled to execute consistent rtw and brand image.
Norsa declined to be interviewed for this article because he is still serving out his last days at Valentino. He starts at Ferragamo at the beginning of October.
Norsa and the rest of Ferragamo’s management will be busy at retail, too. Stores are slated to open this year in Frankfurt, Buenos Aires, Kiev, New Delhi and Hanoi. The company has 85 freestanding units, 108 in-store shops and 39 other outlets.
Martin said Ferragamo is tweaking its current retail presentation by playing with the lighting and product placement, but it’s too early to completely change the brand’s store concept by architect Michael Gabellini. That airy but traditional design made its debut in Venice in 2001. “Today, we want things that are more defined, with a bit more contrast…a bit warmer,” Martin said.