PARIS (Reuters) – Shares in Salvatore Ferragamo fell more than 8 percent on Friday after the Italian luxury goods firm, best known for its shoe designs and leather goods, signalled it would still be mired in a turnaround phase in 2018.
Many luxury goods makers, including Louis Vuitton owner LVMH or Gucci parent Kering, have enjoyed an earnings rebound this year as demand from Chinese consumers in particular improved.
However, some labels like Britain’s Burberry and Ferragamo struggled to catch the rebound, caught up either in efforts to revamp internal operations or their house style.
Ferragamo had already signalled that this year would be a transition period in its ambitious plan to grow revenue at twice the market rate from 2017-2020.
But on Thursday the group said it could not confirm the targets set out for the next three years as the “transition phase” would drag into 2018 too.
AT 1047 GMT the shares had pared some losses, but were still down 6.7 percent and on course for potentially their biggest daily loss in two years. Ferragamo’s stock has already lagged peers in 2017, falling year-to-date against a 37 percent gain in the European luxury sector index .
Analysts have also revised down their earnings expectations for the group.
The label is clearing out inventory products, rethinking its strategy in stores and going through a design overhaul.
“Ferragamo is facing more competition in shoes and leather goods than in the past and needs to upgrade its entire business,” Rogerio Fujimori, an analyst at RBC said in a note, adding that the brand “remains a potential turnaround story but with plenty of short-term risks.”
Paul Andrew, who formerly focused on footwear at the 90-year-old Florence-based firm, is now in charge of women’s clothing and set to present his first collection in February.
Under Chief Executive Eraldo Poletto, who took over in August 2016, Ferragamo has been looking to refresh its image.
Millennials born between the early 1980s and mid-90s already represent a third of the luxury market and have fuelled stellar growth at the likes of Gucci, which is benefiting from a radical new rococo look.
Ferragamo, which had also aimed to improve core profits and gross margins, said on Thursday it was making “significant” IT and marketing investments as luxury players invest in social media campaigns and e-commerce to reach out to more digital-savvy clients.
Some analysts said Ferragamo could eventually become an acquisition target.
“If the current management fails to deliver on the brand relaunch, the probability that the company will be sold to a player who can turn the company around increases significantly,” analysts at Bernstein said in a note.
(Reporting by Sarah White and Helen Reid; Editing by Susan Fenton)