Salvatore Ferragamo Shares Rise Following Trading Update

Shares of Salvatore Ferragamo (BIT:SFER) increased on Monday after the company released its trading update. This update follows the Board of Directors reaffirming its earlier forecast for operating profit, initially shared on October 15, 2024.

Despite facing challenges in the luxury sector and an industry-wide slowdown, the management maintains a steady outlook on operations.

The company also noted a potential impairment in its 2024 consolidated financial statements. Salvatore Ferragamo disclosed potential write-downs of specific assets, estimating impairments could amount to between €70 million and €90 million. However, these impairments are not expected to lead to immediate cash outflows or significantly affect the overall asset base, which was €1.736 million as of June 30, 2024.

The impairment tests will be finalized by March 2025, following a comprehensive review based on established accounting principles like IAS 36.

In addition, UBS has upgraded its rating on Salvatore Ferragamo from 'sell' to 'neutral,' stating that the shares are reasonably priced after a notable decline in value this year. Despite maintaining a largely unchanged fundamental view, analysts noted a significant 55% drop in stock value year-to-date, which underperformed against their luxury sector coverage. Consequently, they regard the shares as fairly valued at the current level, setting a price target of €6.00 per share.

For 2025, UBS projects a modest 3% growth in organic sales driven primarily by contributions from Europe, North America, and Japan. More modest growth is anticipated in Latin America and Asia-Pacific. Notably, the Chinese market is expected to contract by 2%, while North America is projected to contribute approximately 52% of total sales growth.

Analysts predict a stable EBIT margin of 3% and a slight increase in the gross margin to 72.4%. They identified several key factors influencing the company’s performance in 2025, including potential improvements in overall revenue, performance by product categories, and cost-cutting measures to enhance profitability.

However, risks such as potential store closures and the impact of investments in product quality on margins could pose challenges. On the upside, factors like successful product innovation, improved marketing efficiency, and a stronger North American market may enhance overall performance.