January 19, 2009

(BN) Ferragamo to Cut Store Openings by Half as Recession Hurts Luxury Demand

Bloomberg News, sent from my iPhone.

Ferragamo to Cut Store Openings as Crisis Hurts Luxury Demand

Jan. 19 (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 canceling 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 percent and 7 percent 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 percent and 10 percent 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 center, he said, without elaborating on other planned locations for new stores.

Mall Delays

Norsa said store openings would also be slower this year because of delays in shopping-mall developments in places including Las Vegas and Macau. Billionaire Sheldon Adelson's Las Vegas Sands Corp. has halted construction worth about $12 billion in Macau.

Consumer demand has been weakened by the financial crisis, which has seen banks and insurers rack up $1 trillion in credit losses and writedowns since the start of last year.

In the U.S., retailers' holiday sales dropped 2.2 percent, the most in at least 40 years, the International Council of Shopping Centers said this month.

Ferragamo's 2008 sales will be higher than the 687.4 million euros posted in 2007, Norsa said, citing preliminary figures. The label founded in 1927 had "better-than-expected" sales in December after selling more goods at discounted prices, Norsa said.

U.S. Sales

Higher sales in Europe and Asia compensated for a weakening U.S. market last month, Norsa added. Overall sales in the first two weeks of January are slightly higher than in the previous year, he said, while declining to provide specific figures.

Footwear, which still represents about 40 percent of sales even after Ferragamo expanded into clothes, perfumes and accessories, is selling well, Norsa said.

Watches, introduced last year under a license with Timex Group, are also performing well, particularly styles priced at around 1,200 euros, Norsa added.

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.

To contact the reporters on this story: Sara Gay Forden in Milan at sforden@bloomberg.net

Find out more about Bloomberg for iPhone: http://bbiphone.bloomberg.com/iphone

No comments: