Salvatore Ferragamo (SFRGY) shares received a boost in early European trading today, rising by as much as 6.5%, after the group unveiled a surprisingly positive set of first-quarter results.
Sales revenues fell by 2% year-on-year during the first quarter, a result that was in line with consensus forecasts according to analysts at Credit Suisse, although they add that the group beat expectations for Ebitda by 7%.
Having made the best out of a challenging quarter for almost all luxury brands, the Italian retailer's results reveal a 2.5% increase in gross profits despite declining sales, a performance attributable to a notable reduction in costs.
Speaking of the general trading environment, management painted a picture of mixed operating conditions across the globe, with European revenues falling on lower levels of tourism in Europe and Chinese sales sluggish in the wake of the stock market collapse and ongoing economic uncertainty.
Looking ahead, management issued guidance suggesting that Japanese sales may slow further due to weakening consumer confidence and expected softer sales in the U.S. due to a stronger dollar and the consequent impact upon tourist volumes.
On a brighter note, the board singled out Korea, Australia and Mexico as relative sweet spots as well as the travel retail division, which caters for air and sea travelers.
Ferragamo's stronger first-quarter earnings could offer hope to other luxury retailers, many of whom have suffered in recent quarters given the slowdown in China, geopolitical tensions and the consequent impact upon consumer sentiment.
While the likes of Hugo Boss (BOSSY) and Burberry (BURBY) have weaker sales in both core and emerging markets weighing on the shares, Ferragamo's results highlight that it is possible to boost the bottom line even in a tough market.
Responding to the update, analysts at Credit Suisse reiterated their hold rating and affirmed their price target of €22 for the stock. The shares were up by 6.5%, to €21, in the first few hours of today's European session.