Italy's Ferragamo rules out sale as troubles continue

Salvatore Ferragamo will take the time needed to find a new chief executive to help turnaround the Italian shoemaker, its chairman said on Thursday, ruling out a sale of the company.

The family-owned firm, famous for shoes worn by Hollywood stars such as Audrey Hepburn, is striving to revamp its product offering to appeal to a younger clientele and reverse falling sales and profitability.

In a sign this could take time, the company issued a profit warning in December and last week lost CEO Eraldo Poletto, fuelling speculation of a potential sale.

“The sale of the company is out of the question,” said Chairman Ferruccio Ferragamo, who has taken on temporary managing powers, after the group reported a 23 percent drop in core profit for last year.

The Florence-based group warned the negative trends seen in the last few months of 2017 were continuing this year, due to adverse foreign exchange moves and the fact its lower-priced factory outlets were performing better than regular shops.

The chairman said he would run the company for as briefly as possible, but would take the time needed to find the right candidate, who would come from outside the company.

The group did not give a reason for the departure of Poletto, who came from unlisted, premium handbag maker Furla. Some analysts have said the Ferragamo family had grown impatient with his strategy and expected a quicker turnaround.

In February last year, the group said it planned to grow revenue at twice the market rate between 2017 and 2020, backed by a drive to improve performance at existing stores and updates to its product ranges.

But since launching its new business plan, the group’s core profit margins have been falling, hurt in part by a clean-up of inventories.

Last year’s earnings before interest, tax, depreciation and amortisation (EBITDA) of 249 million euros ($306 million) were broadly in line with a Thomson Reuters estimate of 244 million euros. As a percentage of sales, the EBITDA margin slipped to 17.8 percent from 22.5 percent in 2016.

The company cut its dividend to 0.38 euros per share, down from 0.46 euros paid on 2016 results.

Since the December profit warning, Ferragamo shares are down about 4.1 percent against a 2.4 percent rise in Italy's blue-chip index. Trading at 28.6 times its expected earnings, the stock is still seen as expensive by many analysts.