Economic troubles challenge Italian shoemakers
MILAN (Reuters) - Facing economic turmoil in Europe and a slowdown in China, Italian luxury shoemakers Tod's (TOD.MI) and Salvatore Ferragamo (SFER.MI) are reaching out to wealthy tourists travelling the world to reduce their exposure to a weaker home market.
Leather shoemaker Tod's reported on Tuesday a 14 percent sales decline in its core Italian market in the nine months to the end of September, missing analysts' forecasts.
The owner of Tod's, Hogan, Fay and Roger Vivier brands said global sales grew 7.3 percent to 749.9 million euros ($953 million) over the nine-month period.
Salvatore Ferragamo, whose shoes have been worn by Hollywood legend Audrey Hepburn and pop star Lady Gaga, fared better than Tod's in Europe, where third-quarter sales grew 15.7 percent. Nine-month net profits rose 8.1 percent to 84.7 million euros.
Retailers with a global presence can more easily intercept shoppers in Latin America or in remote Chinese cities.
"The present and near future Chinese market perspective is challenging but improving," Ferragamo said in the presentation of its nine-month results on Tuesday.
The global luxury industry will grow at a slower pace in 2012 because of an economic slowdown in China and Europe, consultancy Bain & Co and Italian luxury industry trade group Altagamma said.
Tod's shares closed down 6.3 percent at 88 euros per share, underperforming a positive blue-chip index .FTMIB.
Analysts expected a weak third quarter at Tod's, because the period is mostly exposed to wholesale sales which are feeling the brunt of the crisis in Italy.
Luxury makers draw most of their revenues and margins from stores they directly control, while wholesale sales at other stores are exposed to delayed payments and margin erosion.
"Tod's sales were below estimates, the same goes with margins. The only positive factor was the cash flow, but everybody will now have to cut forecasts for 2013 and 2014," a Milan trader said.
Analysts predict a better fourth quarter as shoppers flock to stores for the holiday season.
Tod's said on Tuesday it was carefully selecting its wholesale distribution in Italy and said it expected "significant" growth in 2012 after a positive start of the autumn-winter season.
In September, Tod's Chief Executive Diego Della Valle said he expected full-year sales to reach 1 billion euros.
(Reporting by Antonella Ciancio, additional reporting by Valentina Caiazzo; editing by Jennifer Clark and Louise Heavens)
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