Salvatore Ferragamo

Earnings Release • Aug 3, 2023

Informazione Regolamentata n. 1220-38-2023		Data/Ora Inizio Diffusione 03 Agosto 2023 17:45:47	Euronext Milan
Societa'	:	SALVATORE FERRAGAMO
Identificativo Informazione Regolamentata	:	180050
Nome utilizzatore	:	FERRAGAMON06 - Benocci
Tipologia	:	REGEM; 1.2
Data/Ora Ricezione	:	03 Agosto 2023 17:45:41
Data/Ora Inizio Diffusione	:	03 Agosto 2023 17:45:47
Oggetto	:	Press Release - 1H 2023 Results
Testo del comunicato

Vedi allegato.

PRESS RELEASE

The Board of Directors of Salvatore Ferragamo S.p.A. approves the Half Year Financial Report as of 30 June 2023

Good progress made in the execution of the strategic priorities strengthens the confidence in our medium‐term ambition

• Revenues: 600 million Euros(‐4.8% vs. 630 million Euros at 30 June 2022, ‐7.2% at constant exchange rates1), as the Company accelerates in the creative transition while continuing in the optimisation of the wholesale and retail networks
• Gross Profit: further increased to 72.2% of Revenues (+40bps vs. 71.8% at 30 June 2022), driven by the ongoing focus on the quality of sales, by channel, policy and product
• Operating Profit (EBIT): 47 million Euros (‐50.8% vs. 95 million Euros at 30 June 2022), reflecting the planned higher investments, mainly in communication
• Gross Operating Profit (EBITDA²): 134 million Euros(‐25.6% vs. 180 million Euros at 30 June 2022)
• Net Profit: 21 million Euros (‐65.4% vs. 62 million Euros at 30 June 2022)
• Net Financial Position³: 278 million Eurosin Net Cash (vs. 309 million Euros at 30 June 2022)

During the same meeting the Board of Directors has:

Appointed the Manager responsible ad interim for preparing financial reports

Marco Gobbetti, Chief Executive Officer and General Manager commented:

"In this first part of the year we made good progress in the execution of our strategic priorities, in line with our plans. We kept the focus on the operating improvements and brand initiatives to support a new offering that is relevant for our customer aspirations, while continuing the optimization of our retail and wholesale networks.

We are pleased by the early results of the products designed by our creative director, Maximilian Davis. These new products still represent a very small portion of the total offer and are yet to contribute meaningfully to the overallsales performance, which reflects, at thisstage, the acceleration of the transition from the previous creative course, as well as our ongoing focus on quality of sales and distribution.

As we move further into the year, the higher share of new products, the continued marketing investments, together with compelling store and on‐line execution, will strengthen the brand image and create engagement with existing and new audiences.

While conscious of an increasingly uncertain market environment, the choices and work we have done reinforce the commitment to our strategic priorities and the confidence in our medium‐term ambition."

Florence, 3 August 2023 – The Board of Directors of Salvatore Ferragamo S.p.A. (EXM: SFER), parent company of the Salvatore Ferragamo Group, in a meeting chaired by Leonardo Ferragamo, examined and approved the Half Year Financial Report as of 30 June 2023, drafted according to IAS/IFRS international accounting principles (Limited Audit).

Notes to the Income Statement for 1H 2023

Consolidated Revenue figures

As of 30 June 2023, the Salvatore Ferragamo Group reported Total Revenues of 600 million Euros down 4.8% at current exchange rates (‐7.2% at constant exchange rates1 ) vs. 1H 2022.

Net Sales by distribution channel⁴

As of 30 June 2023, the Retail distribution channel posted a decrease in consolidated Net Sales of 5.9% (‐4.5% at constant exchange rates1 ) vs. 1H 2022, mainly penalized by a softening American market and selected closures planned in the context of the implementation of ourstrategic plan, while the performances in EMEA and Greater China were positive.

The Wholesale channel registered a decrease in Net Sales of 13.3% (‐14.3% at constant exchange rates1 ) vs. 1H 2022, due to the planned rationalization of our third parties' network, mainly in the US, and the delayed recovery of Travel Retail, while EMEA reported a positive performance.

Net Sales by geographical area⁴

The Asia Pacific registered a 12.9% decrease in Net Sales (‐10.4% at constant exchange rates1 ) vs. 1H 2022, penalized by the weak performance in Korea and in the Travel Retail channel, while the performance of retail in Greater China was positive.

The Japanese market in 1H 2023 registered a 11.4% decrease in Net Sales(‐3.8% at constant exchange rates1 ) vs. 1H 2022.

EMEA posted an increase in Net Sales of 10.8% (+10.9% at constant exchange rates1 ) vs. 1H 2022, delivering a positive performance in both channels.

North America in 1H 2023 recorded a Net Sales decrease of 17.3% (‐18.6% at constant exchange rates1 ) vs. 1H 2022, with the wholesale channel underperforming more than proportionally, mainly as a consequence of the network rationalization.

Net Sales in Central and South America in 1H 2023 were broadly flat, +0.4%, (‐7.3% at constant exchange rates1 ) vs. 1H 2022.

Gross Profit

In 1H 2023 Gross Profit incidence on Revenues increased from 71.8% in 1H 2022 to 72.2% in 1H 2023, driven by the ongoing focus on the quality of sales.

Operating Costs

In 1H 2023 Operating Costs amounted to 387 million Euros, +8.2% at current exchange rate vs. 1H 2022 (+9.3% at constant exchange rates1 ). The increase is mainly driven by the planned investments in Marketing & Communication costs which reached 10.3% incidence on of Revenues in 1H 2023 from 4.9% in 1H 2022.

Gross Operating Profit (EBITDA² )

Gross Operating Profit (EBITDA2 ) amounted to 134 million Euros, from 180 million Euros of 1H 2022, with an incidence on Revenues of 22.3% from 28.5% in 1H 2022.

Operating Profit (EBIT)

Operating Profit (EBIT) amounted to 47 million Euros, a 50.8% decrease vs. the 95 million Euros reported in 1H 2022, reflecting the planned higher investments, mainly in Communication.

Profit before taxes

Profit before taxes in 1H 2023 was positive for 34 million Euros vs. 88 million Euros in 1H 2022.

Net Profit for the Period

Net Profit for the period, including the Minority Interest, amounted to 21 million Euros, a decrease of 65.4% vs. 62 million Euros in 1H 2022. 1H 2023 Group Net Profit was positive for 22 million Euros vs. 62 million Euros in 1H 2022.

Notes to the Consolidated Balance Sheet for 1H 2023

Net Working Capital⁵

Net Working Capital as of 30 June 2023 decreased by 9.6% to 226 million Euros, from 250 million Euros as of 30 June 2022. In particular, the inventories were down 2.6%.

Investments (CAPEX)

As of 30 June 2023, Investments (CAPEX) were 17 million Euros vs. 18 million Euros in 1H 2022, mainly focusing on the renovations of the retail network and investments in digital.

Net Financial Position

Net Financial Position adjusted3 at 30 June 2023 was positive for 278 million Euros (vs. 309 million Euros positive as of 30 June 2022). Including IFRS16 effect, Net Financial Position at 30 June 2023 is negative for 448 million Euros.

****

Notes to the press release

¹ Revenues/Operating Costs at "constant exchange rates" are calculated by applying to the Revenue/Operating Costs of the period 2022, not including the "hedging effect", the average exchange rates of the same period 2023.

² We define EBITDA as operating profit before amortization and depreciation and write‐downs of tangible/intangible assets and Right of use assets. EBITDA is an important managerial indicator for measuring the Group's performance. As EBITDA is not an indicator defined by the accounting principles used by our Group, our method of calculating EBITDA may not be strictly comparable to that used by other companies.

³ Net Financial Position is referring to Adjusted Net Financial Position: not including the IFRS16 effect. The net Financial Position calculated as the sum of Cash and cash equivalents and Other current financial assets, including the positive fair value of derivatives (non‐hedge component) net of Current and non‐current interest‐bearing loans and borrowings plus Current and non‐current Lease Liabilities and Other current and non‐current financial liabilities including the negative fair value of derivatives (non‐hedge component). Net Financial Position Adjusted is the Net Financial Position excluding Current and non‐current Lease Liabilities.

⁴ The variations in Net Sales are calculated at current exchange rates excluding the hedging effect, unless differently indicated.

⁵Net working capital is calculated (in accordance with CESR Recommendation 05‐054/b of February 10, 2005) as inventories, right of return assets and trade receivables net of trade payables and refund liabilities, excluding other current assets and liabilities and other financial assets and liabilities. As net working capital is not an indicator defined by the accounting principles used by our Group, our method of calculating net working capital may not be strictly comparable to that used by other companies.

****

Following up on the press release of June 30, 2023, it is hereby announced that the Company's Board of Directors, which met today, in consideration of the resignation tendered by the CFO and Manager responsible for preparing financial reports, Mr. Alessandro Corsi, who will terminate his employment with the Company on September 30, 2023, and pending the completion of the selection process for the identification of a new CFO, appointed, subject to the favorable opinion of the Board of Statutory Auditors,

Ms. Erika Peruzzi, currently Consolidated Financial Statements Senior Manager of the Company, due to her professional skills and experience, as the interim Manager responsible for preparing financial reports pursuant to and in accordance with Article 154‐bis of the Consolidated Law on Finance, effective October 1, 2023.

Specifically, Ms. Erika Peruzzi graduated with honors from the University of Florence, has more than 20 years of work experience and has served as the Company's Consolidated Financial Reporting Manager since 2019 reporting directly to the CFO.

Ms. Erika Peruzzi will report, effective October 1, to the Chief Executive Officer and General Manager of the Company who, as of the same date, will coordinate the Administration Finance and Control Function, pending the identification of a new CFO.

As of the date of this press release, Ms. Erika Peruzzi does not hold financial instruments of the Company.

****

The manager charged to prepare the corporate accounting documents, Alessandro Corsi, pursuant to article 154‐bis, paragraph 2, of Legislative Decree no. 58/1998 (Consolidated Financial Law), hereby declares that the information contained in this Press Release faithfully representsthe content of documents, financial books and accounting records.

Furthermore, in addition to the conventional financial indicators required by IFRS, this Press Release includes some alternative performance indicators (such as EBITDA, for example) in order to allow for a better assessment of the performance of the economic and financial management. These indicators have been calculated according to the usual market practices.

This document may contain forecasts, relating to future events and operating results, which by their very nature are uncertain, in that they depend on future events and developments that cannot be predicted with certainty. Actual results may therefore differ with those forecasted, due to a variety of factors.

****

The Half Year Financial Report as of 30 June 2023, approved by the Board of Directors on August 3, 2023, will be available to anyone requesting it at the headquarters of the Company in Florence, Via Tornabuoni n. 2, on the authorized web‐storage system eMarket STORAGE , and will also be accessible on the Salvatore Ferragamo Group's website http://group.ferragamo.com in the section "Investor Relations/Financial Documents", in compliance with the law.

****

The Results of 1H 2023 will be illustrated today, 3 August 2023, at 6:00 PM (CET) in a conference call with the financial community. The presentation will be available on the Company's website http://group.ferragamo.com in the "Investor Relations/Presentations" section.

Salvatore Ferragamo S.p.A.

Salvatore Ferragamo S.p.A. is the parent Company of the Salvatore Ferragamo Group, one of the leaders in the luxury industry, and whose origins date back to 1927.

Salvatore Ferragamo is renowned for the creation, production, and worldwide distribution of luxury collections of shoes, leather goods, apparel, silk products and other accessories for men and women, including also eyewear, watches and fragrances under license.

Embedding the spirit of its Founder, Ferragamo reinterprets its heritage with creativity, innovation and sustainable thinking. Uniqueness and exclusivity, along with the blend of style and exquisite 'Made in Italy' savoir‐faire, are the hallmarks of all Ferragamo's products.

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For further information:

Salvatore Ferragamo S.p.A.

Paola Pecciarini Group Investor Relations

Tel. (+39) 055 3562230 investor.relations@ferragamo.com Image Building

Giuliana Paoletti, Mara Baldessari Media Relations

Tel. (+39) 02 89011300 ferragamo@imagebuilding.it

This Press Release is also available on the website http://group.ferragamo.com, in the section "Investor Relations/Financial Press Releases".

***

In the following pages, a more detailed analysis of Revenues, the consolidated income statement, the summary of statement of consolidated financial position, the net consolidated financial position, and the consolidated cash flow statement of the Salvatore Ferragamo Group as of 30 June 2023.

Revenues by distribution channel as of 30 June 2023

	Half-year period ended 30 June
(In thousands of Euro)	2023	% on Revenue	2022	% on Revenue	% Change	at constant exchange rate % Change
Retail	415,117	69.2%	441,080	70.0%	(5.9%)	(4.5%)
Wholesale	166,788	27.8%	192,303	30.5%	(13.3%)	(14.3%)
Net sales	581,905	97.0%	633,383	100.5%	(8.1%)	(7.6%)
Cash flow hedging effect	8,458	1.4%	(11,304)	(1.8%)	na	na
Licenses and services	8,435	1.4%	6,884	1.1%	22.5%	22.5%
Rental income investment properties	1,322	0.2%	1,316	0.2%	0.5%	(0.7%)
Revenues	600,120	100.0%	630,279	100.0%	(4.8%)	(7.2%)

Net Sales by geographic area as of 30 June 2023

	Half-year period ended 30 June
(In thousands of Euro)	2023	% on Net sales	2022	% on Net sales	% Change	at constant exchange rate % Change
Europe	150,679	25.9%	135,934	21.5%	10.8%	10.9%
North America	155,619	26.8%	188,124	29.7%	(17.3%)	(18.6%)
Japan	45,405	7.8%	51,271	8.1%	(11.4%)	(3.8%)
Asia Pacific	189,857	32.6%	217,867	34.4%	(12.9%)	(10.4%)
Central and South America	40,345	6.9%	40,187	6.3%	0.4%	(7.3%)
Net sales	581,905	100.0%	633,383	100.0%	(8.1%)	(7.6%)

Net Sales by product category as of 30 June 2023

	Half-year period ended 30 June
(In thousands of Euro)	2023	% on Net sales	2022	% on Net sales	% Change	at constant exchange rate % Change
Footwear	266,856	45.9%	279,691	44.2%	(4.6%)	(4.3%)
Leather goods	234,778	40.3%	271,851	42.9%	(13.6%)	(12.9%)
Apparel	38,851	6.7%	40,084	6.3%	(3.1%)	(2.0%)
Accessories	39,612	6.8%	39,854	6.3%	(0.6%)	0.3%
Fragrances	1,808	0.3%	1,903	0.3%	(5.0%)	(4.7%)
Net sales	581,905	100.0%	633,383	100.0%	(8.1%)	(7.6%)

Consolidated results for Salvatore Ferragamo Group

Consolidated income statement as of 30 June 2023

(In thousands of Euro)	2023	% on Revenue	Half-year period ended 30 June 2022	% on Revenue	% Change
Revenue from contracts with customers	598,798	99.8%	628,963	99.8%	(4.8%)
Rental income investment properties	1,322	0.2%	1,316	0.2%	0.5%
Revenues	600,120	100.0%	630,279	100.0%	(4.8%)
Cost of goods sold	(166,571)	(27.8%)	(177,474)	(28.2%)	(6.1%)
Gross profit	433,549	72.2%	452,805	71.8%	(4.3%)
Style, product development and logistics costs	(29,182)	(4.9%)	(25,679)	(4.1%)	13.6%
Sales & distribution costs	(224,454)	(37.4%)	(215,485)	(34.2%)	4.2%
Marketing & communication costs	(61,723)	(10.3%)	(31,069)	(4.9%)	98.7%
General and administrative costs	(70,093)	(11.7%)	(83,835)	(13.3%)	(16.4%)
Other operating costs	(11,664)	(1.9%)	(11,448)	(1.8%)	1.9%
Other income	10,540	1.8%	10,100	1.6%	4.4%
Total operating costs (net of other income)	(386,576)	(64.4%)	(357,416)	(56.7%)	8.2%
Operating profit	46,973	7.8%	95,389	15.1%	(50.8%)
Net financial charges	(12,856)	(2.1%)	(7,183)	(1.1%)	79.0%
Profit before taxes	34,117	5.7%	88,206	14.0%	(61.3%)
Income taxes	(12,686)	(2.1%)	(26,272)	(4.2%)	(51.7%)
Net profit/(loss) for the Period	21,431	3.6%	61,934	9.8%	(65.4%)
Net profit/(loss) - Group	22,485	3.7%	61,590	9.8%	(63.5%)
Net profit/(loss) - minority interests	(1,054)	(0.2%)	344	0.1%	na

(*) EBITDA is operating profit before amortization and depreciation and write-downs of tangible/intangible assets and Right of use assets. EBITDA so defined is a parameter used by the management to monitor and assess the operating performance and is not identified as an accounting measurement under IFRS and, therefore, must not be considered as an alternative measurement to assess Group performance. Since the composition of EBITDA is not regulated by reference accounting standards, the determination criterion applied by the Group may differ from that adopted by others and therefore may not be comparable.

EBITDA (*) 133,574 22.3% 179,505 28.5% (25.6%)

Summary of consolidated statement of financial position as of 30 June 2023

(In thousands of Euro)	30 June	31 December	30 June	Var% 06.23	Var% 06.23
	2023	2022	2022	vs 12.22	vs 06.22
Property, plant and equipment	180,252	191,564	185,467	(5.9%)	(2.8%)
Investment property	25,138	27,747	30,699	(9.4%)	(18.1%)
Right of use assets	630,989	479,724	497,219	31.5%	26.9%
Goodwill	6,679	6,679	6,679	‐	‐
Intangible assets with definite useful life	34,269	34,903	30,257	(1.8%)	13.3%
Inventories and Right of return assets	294,979	281,026	302,713	5.0%	(2.6%)
Trade receivables	101,152	94,490	120,066	7.1%	(15.8%)
Trade payables and Refund liabilities	(170,435)	(184,116)	(173,095)	(7.4%)	(1.5%)
Other non current assets/(liabilities), net	83,075	78,489	81,746	5.8%	1.6%
Other current assets/(liabilities), net	17,704	(31,023)	(37,283)	na	na
Net invested capital	1,203,802	979,483	1,044,468	22.9%	15.3%
Group shareholders' equity	734,968	751,810	731,809	(2.2%)	0.4%
Minority interests	20,696	23,599	23,088	(12.3%)	(10.4%)
Shareholders' equity (A)	755,664	775,409	754,897	(2.5%)	0.1%
Net financial debt/(surplus) (B) (1)	448,138	204,074	289,571	119.6%	54.8%
Total sources of financing (A+B)	1,203,802	979,483	1,044,468	22.9%	15.3%
Net financial debt/(surplus) (B)	448,138	204,074	289,571	119.6%	54.8%
Lease Liabilities (C)	725,672	575,323	598,992	26.1%	21.1%
Net financial debt /(surplus) adjusted (B-C) (2)	(277,534)	(371,249)	(309,421)	(25.2%)	(10.3%)
Net financial debt /(surplus) adjusted/Shareholders' equity	(36.7%)	(47.9%)	(41.0%)

(1) The Net financial debt/(surplus) is calculated as the sum of Current and non-current interest-bearing loans and borrowings plus Current and non-current Lease Liabilities and Other current and non-current financial liabilities including the negative fair value of derivatives (non-hedge component), net of Cash and cash equivalents and Other current financial assets, including the positive fair value of derivatives (non-hedge component).

(2) The Net financial debt/(surplus) adjusted is calculated as the Net financial debt/(surplus) excluding Current and non-current Lease Liabilities.

Consolidated Net financial position as of 30 June 2023

(In thousands of Euro)		30 June 31 December	30 June	Var	Var
	2023	2022	2022	06.23 vs 12.22	06.23 vs 06.22
A. Cash	182,342	300,312	374,878	(117,970)	(192,536)
B. Cash equivalents	97,739	91,042	34,829	6,697	62,910
C. Other current financial assets	30,897	10,255	‐	20,642	30,897
D. Current financial assets (A+B+C)	310,978	401,609	409,707	(90,631)	(98,729)
E. Current financial debt (including debt instruments)	33,444	30,360	26,449	3,084	6,995
F. Current portion of non current financial debt	115,982	106,586	134,414	9,396	(18,432)
G. Current financial debt (E+F)	149,426	136,946	160,863	12,480	(11,437)
H. Current financial debt, net (G-D)	(161,552)	(264,663)	(248,844)	103,111	87,292
I. Non current financial debt (excluding debt instruments)	609,690	468,737	538,415	140,953	71,275
J. Debt instruments	‐	‐	‐	‐	‐
K. Trade payables and other current debts	‐	‐	‐	‐	‐
L. Non-current financial debt (I+J+K)	609,690	468,737	538,415	140,953	71,275
M. Net financial debt (H+L)	448,138	204,074	289,571	244,064	158,567
(In thousands of Euro)		30 June 31 December	30 June	Var	Var
	2023	2022	2022	06.23 vs 12.22	06.23 vs 06.22
Net financial debt/(surplus) (a)	448,138	204,074	289,571	244,064	158,567
Non current lease liabilities	609,690	468,737	486,691	140,953	122,999
Current lease liabilities	115,982	106,586	112,301	9,396	3,681
Lease liabilities (b)	725,672	575,323	598,992	150,349	126,680
Net financial debt/(surplus) adjusted (a-b)	(277,534)	(371,249)	(309,421)	93,715	31,887

Consolidated statement of cash flows as of 30 June 2023

	Half-year period ended 30 June
(In thousands of Euro)	2023	2022
Net profit/(loss) for the period	21,431	61,934
Depreciation, amortization and write down of property, plant and equipment, intangible assets, investment properties	26,405	25,182
Depreciation of Right of use assets	60,196	58,934
Income Taxes	12,686	26,272
Net change in provision for employee benefit plans	(425)	(218)
Loss/(gain) on disposal of tangible and intangible assets	164	442
Net Interest expenses/income and Interest on lease liabilities	7,539	6,776
Other non cash items	1,555	123
Net change in net working capital	(43,091)	(44,643)
Net change in other assets and liabilities	(16,974)	(10,502)
Income Taxes paid	(40,329)	(11,606)
Net Interest expenses/income and Interest on lease liabilities paid	(7,031)	(6,967)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	22,126	105,727
Purchase of tangible assets	(12,308)	(13,938)
Purchase of intangible assets	(5,018)	(3,609)
Proceeds from the sale of tangible and intangible assets	6	-
Net change in other current financial assets	(20,394)	-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(37,714)	(17,547)
Net change in financial payables	4,490	(39,734)
Repayment of lease liabilities	(57,666)	(55,172)
Payment of dividends	(46,318)	(56,391)
Purchase of Treasury shares	-	(38,574)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(99,494)	(189,871)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	(115,082)	(101,691)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR	391,354	511,796
Net increase/(decrease) in cash and cash equivalents	(115,082)	(101,691)
Net effect of translation of foreign currencies	3,809	(398)
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	280,081	409,707
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	22,126	105,727
Repayment of lease liabilities	(57,666)	(55,172)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ADJUSTED (*)	(35,540)	50,555

(*) Net cash provided by (used in) operating activities adjusted is calculated as Net cash provided by (used in) operating activities net of the Repayment of lease liabilities (showed in the Net Cash provided by (used in) financing activities).