November 12, 2019 / 7:12 PM / a month ago

UPDATE 1-Italy's Ferragamo warns of slowdown after Q3 sales slip

(Adds details, background)

By Claudia Cristoferi

MILAN, Nov 12 (Reuters) - Italian luxury group Salvatore Ferragamo posted a fall in third-quarter revenue that dampened signs of recovery in the first half of the year and warned of further weakness ahead due to the impact of unrest in Hong Kong and a weak U.S. market.

“The slowdown in revenues and operating margins reported in the third quarter 2019 may persist also in the last part of the year,” the company said on Tuesday.

In the July-to-September period, total revenue fell by 3.6% at constant exchange rates and closely watched like-for-like retail sales decreased by 0.7%, interrupting growth posted in the previous six months after 10 quarters of falls.

Like other luxury brands, the Hong Kong turmoil severely hit group sales from July onwards and there are no signs of recovery so far, Chief Executive Micaela le Divelec told analysts in a conference call.

In the quarter ended September, Ferragamo’s sales in the luxury hub slipped by 45% and industry expectations are that in the medium-term turnover in Hong Kong will stabilise at roughly half of what it was before the protests started, she added.

The former Gucci executive, who has been at the helm of Ferragamo for a little over a year, nevertheless confirmed the group’s re-launch strategy, which aims to raise the brand’s image and drive like-for-like sales growth.

The higher costs associated with the plan, however, are weighing on profit in the short term and 2020 will also be a year of investments, the group said.

In the nine months, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) declined by 1.5% to 147 million euros ($162 million) after they rose 2.1% in the first half of the year.

Revenue totalled 994 million euros in the nine months, with an increase at constant exchange rates of 1.9%.

Analysts had expected 994 million euros in sales and 139 million in EBITDA, according to a Reuters poll.

$1 = 0.9074 euros Editing by David Evans

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