- Revenues: 1,347 million Euros (-3.3% vs. 1,393 million Euros of FY 2017)
- Gross Operating Profit (EBITDA): 214 million Euros (-13.8% vs. 249 million Euros of FY 2017)
- Operating Profit (EBIT): 150 million Euros (-19.5% vs. 186 million Euros of FY 2017)
- Net Profit: 90 million Euros (-21.1% vs. 114 million Euros of FY 2017)
- Net Financial Position: positive at 169 million Euros (vs. 127 million Euros of FY 2017)
- Proposal of distribution of a Dividend of 0.34 Euros per Ordinary Share (vs. 0.38 Euros of FY 2017)
During the same meeting, the Board of Directors has:
- Approved the Corporate Governance Report and Remuneration Report
- Approved the non-financial Report at 31st December 2018 pursuant to Legislative Decree n. 254/2016
- Convened the Ordinary Shareholders’ Meeting
Florence, 12 March 2019 – The Board of Directors of Salvatore Ferragamo S.p.A. (MTA: SFER), parent company of the Salvatore Ferragamo Group, one of the global leaders in the luxury sector, in a meeting chaired by Ferruccio Ferragamo, examined and approved the draft Company Statutory Financial Statements and the Consolidated Financial Statements for the Year ended 31 December 2018, both prepared according to IAS/IFRS international accounting principles.
Notes to the Income Statement for FY 2018
Consolidated Revenue figures
As of 31 December 2018, the Salvatore Ferragamo Group reported Total Revenues of 1,347 million Euros down 3.3% at current exchange rates (-1.7% at constant exchange rates2) vs. the 1,393 million Euros recorded in FY 2017. Revenues in 4Q 2018 registered a 3.5% decrease, penalized by the currencies impact (-1.8% at constant exchange rates2), by the lower incidence of promotional sales in the primary channel, by lower Revenues in the secondary channel and by the negative trends of the wholesale business.
Revenues by distribution channel3
As of 31 December 2018, the Group’s Retail network counted on a total of 672 points of sales, including 409 Directly Operated Stores (DOS) and 263 Third Party Operated Stores (TPOS) in the Wholesale and Travel Retail channel, as well as the presence in Department Stores and high-level multi-brand Specialty Stores.
In FY 2018 the Retail distribution channel posted consolidated Revenues down 3.0% (-1.1% at constant exchange rates2), with a decrease of -1.3% at constant exchange rates2 and perimeter (like-for-like) vs. FY 2017, mainly due to lower Revenues in the secondary channel.
In 4Q 2018 Retail Revenues remained stable at constant exchange rates2, with a -1.0% total like-for-like performance, but positive in the primary channel in all geographical areas.
The Wholesale channel, penalized during all the year 2018 by the destocking activity and the strategic rationalization, registered a decrease in Revenues of 3.8% (-2.7% at constant exchange rates2) vs. FY 2017.
In 4Q 2018 Wholesale Revenues were down 5.4% at constant exchange rates2, mainly due to the unfavourable performances in EMEA and US, while the Asia Pacific area and the Travel Retail channel registered positive trends.
Revenues by geographical area3
The Asia Pacific area is confirmed as the Group’s top market in terms of Revenues, decreasing by 1.0% (+0.8% at constant exchange rates2) vs. FY 2017, with a positive performance in Greater China, partially penalized by the negative performance in South East Asia. Specifically, in 4Q 2018, the retail channel in China recorded a solid Revenue growth of 7.6% (+10.1% at constant exchange rates2) vs. 4Q 2017.
EMEA posted, in FY 2018, a decrease in Revenues of 6.1% (-5.9% at constant exchange rates2), mainly owed to the negative wholesale business in the last part of the year due to the delayed deliveries following the change of a commercial partner in a strategic market in the Middle East.
North America recorded a Revenue decrease of 5.4% (-2.4% at constant exchange rates2) in FY 2018, mainly impacted by the negative trend of the department stores sales.
The Japanese market registered a 0.4% decrease in Revenues (-1.0% at constant exchange rates2) in FY 2018, with retail stores recording a positive performance at constant exchange rates2 both in FY 2018 and in 4Q 2018, while negatively impacted by the strategic rationalization of the wholesale channel.
Revenues in the Central and South America in FY 2018 were down 1.9%, but up 4.2% at constant exchange rates2, mainly thanks to the performance of the retail network.
Revenues by product category3
Among the product categories, at constant exchange rates2, handbags and leather accessories were up 2.6% and fragrances 6.5%, vs. FY 2017.
Footwear posted a 3.9% decrease at constant exchange rates2 in FY 2018, while in 4Q 2018 footwear reported a growth in Revenues in the primary retail channel.
In FY 2018 the Gross Profit decreased by 4.1% to 862 million Euros. Its incidence on Revenues was down 50 basis points, moving to 64.0%, from 64.5% of FY 2017, mainly due to the negative impact of currencies, partially compensated by the improvement of full price sales.
In FY 2018 Operating Costs remained stable at 712 million Euros (+2.5% at constant exchange rates2) vs. FY 2017. The increase in costs is mainly due to the beginning of the activities for the reinforcement of the organization and processes and to the communication expenses.
Gross Operating Profit (EBITDA1)
The Gross Operating Profit (EBITDA1) decreased by 13.8% over the period, to 214 million Euros, from 249 million Euros of FY 2017, with an incidence on Revenues down to 15.9%, from 17.8% of FY 2017.
Operating Profit (EBIT)
The Operating Profit (EBIT) decreased from 186 million Euros in FY 2017 to 150 million Euros (-19.5%) in FY 2018, with an incidence on Revenues of 11.1% from 13.4%.
Profit before taxes
The Profit before taxes in FY 2018 amounted to 136 million Euros (-21.6%), from 173 million Euros in FY 2017, and its incidence on Revenues was 10.1% vs. 12.4% in FY 2017.
Net Profit for the Period
The Net Profit for the period, including a Minority Interest of 2 million Euros, was 90 million Euros, marking a 21.1% decrease. To note that the Net Profit in 4Q 2018 shows a negative impact, for ca. 9 million Euros, due to provisions and payment, for income taxes for previous years, following tax audits in some Group companies, while in 4Q 2017 it was negatively impacted by the US fiscal reform, for ca. 13 million Euros.
The FY 2018 Group Net Profit was 88 million Euros, compared to 119 million Euros in FY 2017, marking a decrease of 25.5%.
Notes to the Balance Sheet for FY 2018
Net Working Capital4
The Net Working Capital as of 31 December 2018 increased by 8.5% to 294 million Euros, from 270 million Euros as of 31 December 2017. In particular, the Inventory was up 12.4%, but only 4.6% at constant exchange rates.
Investments (CAPEX) was 71 million Euros as of 31 December 2018 vs. 88 million Euros in FY 2017, mainly for the renovation of the store network, the Distribution Center and the IT projects.
Net Financial Position
The Net Financial Position at 31 December 2018 was positive for 169 million Euros, compared to positive 127 million Euros as of 31 December 2017.
In the current macroeconomic and market environment, characterized by low visibility, the key actions of Salvatore Ferragamo Group mainly focus on a communication aimed at enhancing the brand and on optimizing the processes and the organizational structure, consistently with the activities already started in the second part of 2018, aimed at creating the foundations for a sustainable growth in the medium term.
Notes to the press release
 We define EBITDA as operating income plus (i) depreciation of property, plant and equipment, investment property, (ii) amortization of other intangible assets with definite useful life and (iii) write-downs of property, plant and equipment, investment property and other intangible assets with definite useful life and goodwill. EBITDA is an important managerial indicator for measuring the Group’s performance. As EBITDA is not an indicator defined by the accounting principles used by our Group, our method of calculating EBITDA may not be strictly comparable to that used by other companies.
2 Revenues at “constant exchange rates” are calculated by applying to the Revenue of full-year 2017, not including the “hedging effect”, the average exchange rates of full-year 2018.
Operating Costs at “constant exchange rates” are calculated by applying to the Operating Costs of full-year 2017, the average exchange rates of full-year 2018.
3 The variations in Revenues are calculated at current exchange rates including the hedging effect, unless differently indicated.
4 Net working capital is calculated (in accordance with CESR Recommendation 05-054/b of February 10, 2005) as inventories and trade receivables net of trade payables (excluding other current assets and liabilities and other financial assets and liabilities). As net working capital is not an indicator defined by the accounting principles used by our Group, our method of calculating net working capital may not be strictly comparable to that used by other companies.