Ferragamo Confirms 2013 Outlook as Quarterly Profit Jumps
Salvatore Ferragamo SpA (SFER), an Italian maker of $1,390 sandals, rose to a record in Milan trading after first-quarter profit beat estimates and the company confirmed its projection for earnings growth this year.
The shares gained as much as 4.5 percent to 24.15 euros, the highest price since a June 2011 initial public offering. They traded at 24.13 euros as of 9:31 a.m., more than double the IPO price of 9 euros a share, and giving the company a market value of more than 4 billion euros ($5.2 billion).
“We see a compelling long-term investment proposition at Ferragamo,” Louise Singlehurst, an analyst at Morgan Stanley, said in a note today. Still, the valuation remains “rich” at a multiple of 26 times estimated 2014 earnings, compared with 16 times for the wider luxury industry, she wrote.
Earnings before interest, taxes, depreciation and amortization rose 26 percent to 48 million euros, Florence, Italy-based Ferragamo said after markets closed yesterday. Analysts predicted 42.9 million euros, according to the average of nine estimates compiled by Bloomberg.
The performance was driven by strong performances in the U.S. and Latin America, while Japan is looking stronger, Laura Abitbol, an analyst at Barclays Plc, said in a note.
“While this is a seasonally quiet quarter, it does provide strong evidence of the operating leverage in the business,” Abitbol wrote. Earnings growth was 3.4 times stronger than revenue growth, the analyst noted.
Sales in the quarter advanced 8.6 percent to 281.9 million euros, or by 9.6 percent excluding currency shifts.
Business patterns this year justify expectations for increases in revenue and profit through 2013 even as sales growth slows, Ferragamo Chief Executive Officer Michele Norsa said on a conference call. Luxury competitors including LVMH Moet Hennessy Louis Vuitton SA (MC) and PPR (PP) SA-owned Gucci last month reported the weakest quarterly sales growth in more than three years as demand softened in Europe and Asia.
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