The luxury goods maker is getting blasted by economy and scotching store openings.
Bloomberg: Salvatore Ferragamo SpA, whose shoes have been worn by Greta Garbo and Marilyn Monroe, plans to reduce store openings by half this year as the global recession hurts demand for luxury goods.
The company plans to open about 20 stores this year, compared with about 45 in 2008, Chief Executive Officer Michele Norsa said in an interview. As recently as September, Norsa said he planned to keep store growth for the Florence, Italy-based company at the same level as last year.
Luxury-goods makers are cutting costs to protect profitability, with LVMH Moet Hennessy Louis Vuitton SA cancelling a planned flagship Tokyo store and Bulgari SpA halting all store openings beyond the 12 planned for this year. Sales for the 175 billion euro ($234 billion) luxury goods industry may slide between 3 per cent and 7 per cent this year, excluding currency movements, consulting firm Bain & Co. estimated in October.
“It’s important to keep developing our own retail because directly owned stores have performed better in the crisis than wholesale, with department stores among the worst hit,” Norsa said before Ferragamo’s men’s wear show in Milan yesterday.
Ferragamo plans to keep prices stable this year except in Japan, where Norsa said he plans to cut prices between 5 per cent and 10 per cent to stimulate demand.
Seven or eight outlets will be opened in China, while stores are also planned in Valencia, Spain, and in London’s Westfield shopping centre, he said, without elaborating on other planned locations for new stores.
Store openings are also down for another reason: (luxury) mall delays. Stores planned for malls, such as at Sheldon Adelson’s Las Vegas Sands construction in Macau, are on ice because the malls aren’t opening as planned.
Something else that’s on ice? Ferragamo’s IPO.
Ferragamo’s initial public offering, which had been expected in 2008, “depends on the market,” Norsa said.
Ferragamo has appointed JPMorgan Chase & Co. and Mediobanca SpA to arrange its IPO when markets improve. The shoemaker is still owned by the widow of founder Salvatore Ferragamo and other family members.
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