Aeffe surges as it proves that wholesale focus is still key for luxury brands
Aeffe had a strong first half as success in Greater China helped to drive its net profits up by almost 80% and it also turned in a healthy double-digit revenue rise, with the increase spread across both ready-to-wear and its footwear/leathergoods units. And wholesale rose fastest with the firm ably demonstrating that not all luxury firms are trying to minimise wholesale's contribution.
The company’s earnings lifted by an impressive 79% to reach €8.3 million, while profit on an Ebitda basis also powered ahead by 35% to €21 million and operating profit was up 39% to €14.5 million.
Revenue may have risen more slowly but the increase was still a good one and with profit growth outstripping revenue rises, it certainly means that the company is getting its strategy right. Aeffe saw a 14.1% revenue increase that took turnover up to €171.1 million, while revenues rose an even better 15% on a currency-neutral basis.
The RTW division, which is the company's biggest business unit, saw sales of €131.7 million, a 13.2% increase. And the all-important high-margin footwear and leathergoods division rose even faster with an increase of 15.4% to €58.1 million.
Net debt fell to €40.9 million from €67.1 million a year earlier, which is always a good position for a company to be in.
The company’s Executive Chairman Massimo Ferretti said that he was pleased with the ongoing growth trend at Aeffe’s owned brands, especially against an economic backdrop “characterised by volatility and high competitiveness.”
The company controls the Alberta Ferretti, Philosophy di Lorenzo Serafini, Moschino and Pollini brands and also has a manufacturing deal for Moschino designer Jeremy Scott’s own label, as well as for the Cédric Charlier brand.
Regionally, the company saw success in Italy, which is a key market that makes up almost half of its sales (47%). It rose 12.7% to €81.2 million. The rest of Europe accounts for only 21% of sales but saw a slightly bigger increase as the UK, Germany, France and Eastern Europe all did well. Sales in Europe rose 13.1% to 36.1 million and the Russian market, which alone accounts for 3% of the firm’s total, rose 13.9%, “showing a good recovery compared to the last year.”
But the US, where the firm sources 5% of its turnover, was down 7.5% to €9 million. Even though it rose on a currency-neutral basis, that rise was a slender 1.6% so this is clearly a market where there’s work to do.
However, the Rest of the World unit certainly isn’t struggling as sales rose 25% to €39.6 million with Greater China surging 41%.
The company also said that sales at its own stores rose 5.4% to €41.1 million while wholesale was up a pleasing 17.7% to €123.8 million. Given that wholesale is the firm’s biggest channel - unlike many of its luxury peers - that rise was crucial in the period.
The company’s directly-operated store numbers remained largely unchanged during the first half but the firm increased its franchised location numbers in Asia with a number of openings in China for the Moschino brand.
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