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Edited Transcript of SFER.MI earnings conference call or presentation 14-Mar-17 5:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 Salvatore Ferragamo SpA Earnings Call

Florence Mar 14, 2017 (Thomson StreetEvents) -- Edited Transcript of Salvatore Ferragamo SpA earnings conference call or presentation Tuesday, March 14, 2017 at 5:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ernesto Greco

Salvatore Ferragamo SpA - CFO

* Eraldo Poletto

Salvatore Ferragamo SpA - CEO

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Conference Call Participants

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* Nicky Cheung

MainFirst Bank AG - Analyst

* Elena Mariani

Morgan Stanley - Analyst

* Hermine de Bentzmann

Raymond James - Analyst

* Annelaure Bismuth

HSBC - Analyst

* Mario Ortelli

Bernstein. - Analyst

* Thomas Chauvet

Citigroup - Analyst

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Presentation

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Operator [1]

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Thank you for standing by and welcome to the Full-Year 2016 Group Results Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session. (Operator Instructions) I must advice you that this conference is being recorded today, Tuesday, March 14, 2017.

I would now like to hand the conference over to your first speaker today, Ernesto Greco. Please go ahead.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [2]

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Thank you. Good evening to everybody and thanks for attending this conference call, which will be dictated to the full-year 2016 financial results. And, first of all, forgive us for the late starting time of this conference call, but we had to avoid an overlapping with another company reporting their results. So we will try to move fast and to leave it to you enough time for the questions and also to leave time to Mr. Poletto to give you an update on the current activities that the Company is implementing.

Starting, I have to read as usual the disclaimer, which says that this presentation contains forward-looking statements regarding future events and the results of the Company that are based on the current expectations, projections and assumptions of the management of the Company. The actual results may differ materially from those expressed in any forward-looking statement and the Company does not assume any liability with respect thereto.

This document has been prepared solely for this presentation and does not constitute any offer or invitation to sell or any solicitation to purchase any share in the Company. The manager in charge of preparing the Company financial reports hereby certifies that the accounting disclosures of this document are consistent with the accounting documents, ledgers and entries.

Please, Eraldo, go on with the presentation.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [3]

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Good evening, everybody. First, I would like to thank Ernesto for the -- I will say, for the major support in the last six months with me, really it's a great asset and I would have to thank also the name of the family and the Board for your tenure in this Company for a great success, for bringing this Company to the level it's now. So, thank you, Ernesto.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [4]

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Thank you to you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [5]

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You're a great asset. Okay, I would try to go faster through the market scenario for 2016 and the results, because I think it will be great [vision] to give you an update on what's happening after our Investor Day of February 1, further, and then to update you, as to allow you to give you enough time for questions.

So the sector, the luxury sector, in 2016 went through a difficult year, with some improvements in the fourth quarter and we had some benefits from it. The industry is going under a complete kind of revamping or restructuring for the real estate situation, particularly in China. So, they are performing more or the size of the stores.

Europe, a weak economy, the macroeconomics, geopolitical uncertainty and the Brexit issue and all the kind of non-European activities in some of the governments. US, softer goods consumption and the strong US dollar (inaudible) will have in terms of tourist traffic and big evolution of the [Travel Retail] channel.

Japan, kind of slowing down compared to the year before, a stronger yen, due to stronger traffic and inbound Chinese, but with, I would say, less buying power that did impact luxury.

Travel Retail, still strong, particularly in the -- around the year, but in particular, I would say, on the fourth quarter, because of the anticipation of the Chinese New Year.

Going to the Salvatore Ferragamo key facts, topline is 1% up, as you well know at EUR1,438 million, with a 4% acceleration on the fourth quarter. Retail up 2% and with acceleration on the fourth quarter too, of 5%. The wholesale down generally around 2%, due to the lower tourist flow and the weakness in the department store, very strong markdown activity in the US, but with, I would say, a better results on the fourth quarter.

APAC up 1% in fiscal year 2016 and end up 4% in fourth quarter. Mainland China continued to be positive, plus 6% and plus 13% of the fourth quarter at constant exchange rate, while Hong Kong still double-digit negative, and Macau single-digit negative.

Europe being penalized by tourist flow, down 4%, but we saw some improvement on the fourth quarter and we have a better performance of retail business. So that was good news.

And the North America has been up 4% for the entire year, with an acceleration of 7% for fourth quarter and retail up 10%.

Japan, stable as the year before, but with a stronger performance, up 3% of the fourth quarter. So, even if we had kind of very strong comparison back to 2015. Latam keeps performing very well, really 16% to the year before and that is good news, this part the -- I would say, the Europe exchange rate performance.

For the Company, going to the key numbers, gross profit is up 2% to EUR965 million, with an incidence on the net sales 67.1%, up 80 basis points compared to the year before. And EBITDA, stable at EUR324 million, with 22.5% revenue contribution. So in terms of sales and EBITDA, we can say that we had a situation similar to the year before. And the interesting news, the good news is that the Group net profit is up 17% to the year before, due to the Patent Box benefit, and so we end up at EUR202 million versus fiscal year 2015. So I think that is very good news.

And talking about the financial position, we are at minus EUR8 million and was against minus EUR10 million the year before. However, we have to consider that we had an extraordinary outflow of EUR15.5 million, due to the acquisition of a JV with Li & Fung Group.

And I would let Mr. Greco Ernesto to go through some of the financial details.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [6]

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Okay. Because the sales were released a couple of months ago, I suggest to skip the analysis of the areas and the product categories and to jump to chart 24, in which you can find the consolidated profit and loss. As Mr. Poletto was saying, EUR1,438 million was the amount of the revenues. The gross profit, which was in 2015 at the level of 66.3%, increased by 80 basis points. But probably, even more important is the fact that in two years, 2014 going to 2016, the increase was 340 basis points. So in two years, Ferragamo Group had really a very strong increase in the gross profit performance.

I believe that the total operating cost, which amounted to EUR704 million, were limited in growth only 3.1%. And even if we can see this amount in constant exchange rate, the percentage goes up to 3.4%, so very minimal impact coming from the exchange rate. As usual, the two most important run item in OpEx are represented by the payroll cost and by the rent. EUR201 million was the amount of the payroll and EUR210 million the amount of the rent. The increase, respectively, was 3.2% and 3.3%. So more or less in the average of the total OpEx.

As we commented during the November conference call, the rent contract were in many instances renewed, renegotiated and especially in Mainland China, we were able to get some better conditions. And, of course, we expect that even in 2017 this activity could go on.

Going to the line item of taxes, which says that the Group will be charged by EUR47.3 million of taxes against the EUR76.9 million of the previous year, I should give to you the breakdown of the benefit related to the Patent Box, because you know that in fiscal year 2016, we booked two installments over the Patent Box benefit. One, and the amount is EUR13.6 million, related to 2015 and EUR18.5 million related to 2016. So the tax rate we report for 2016 is about 19%. But, as I said, we should, if you want to normalize the tax rate of the Group, deduct the extra 2015 benefit, so you arrive to something in the range of a tax rate of 24%, 25%. Please have in mind that going into 2017, the portion of the exemption will move from 40% in 2016, up to 50% in 2017. So I believe that it is reasonable to expect a further improvement in this benefit. Group net income EUR202 million, certainly is the record for the Ferragamo Group, up by 17%.

Please go on, on page 25, in which we have the balance sheet. Again, the most important item in the balance sheet is the inventory, which was EUR375 million. It used to be, in 2015, EUR351 million. So we had an increase of 6.7%. Honestly, I should say that still the current amount is in excess of what we judge to be an optimal amount, but certainly we had a reduction -- a material reduction from the level we had in September. I remember you that in September, the delta between 2016 and 2015 was 15.6%. Today, still there is an excess, but the delta between the two years is limited to 6.7%.

In terms of net position, as Eraldo was recalling, we had at the end of December 2016, minus EUR8 million, after having distributed almost EUR79 million of dividend and having invested EUR74 million in CapEx. The interesting news is that as of the end of February, the financial position of the Company is cash position positive, [EUR1,432 million]. So in a couple of months, the Company was capable to generate a massive amount of cash.

I would stop my comments here and to leave to Mr. Poletto to give a word.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [7]

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Okay, thank you Ernesto, very clear. I would like to -- in February 3, we met some of you, or you saw the presentation about the strategy that's going to happen in 2017 and ahead. And I think the effort could be quite interesting to look back on 2016, to get some -- to update you on what's happened, based on what we had presented to you.

So going back now, we'll discuss about the brand, the product a bit, retail mindset around the organization, what you're going to do and the -- I would say that people evolution, is the people asset.

Talking about the brand, the fall/winter 2017, as you saw in the presentation is just some example, it's not the Company per se, but will be digitally conceived, means that the mindset we are going to create, the campaign would be digital and then we will use in the traditional channels. The focus will be even on the campaign on shoes and bags, but of course with a very strong brand identity and brand recognition, because we are a lifestyle brand. But the focus will be on the two key categories. The product will be based on must-have, means that we will get focus on few products and go after them in a big way. And the idea and the attitude would be about -- talk about the brand DNA, but with a very contemporary twist. We are working, as we speak, with some option of agencies, supporting us in this strategy and how to execute. So we are very well along there with a new gentleman in (inaudible) in charge of marketing.

Going even to the situation and to what we discussed to do in terms of marketing, to be very focused (inaudible) to do in a better way and with more energy. We will have four brand building events a year. And we are creating two different in-store event formats for the key flagship stores around the world, in order to really do local marketing activity and outreach to get the people who are engaged in our stores and on the digital. At the same time, digital will become more and more relevant with a very strong push in terms of content and excitement and newness through our digital and the Internet channels. So, there is a calendar from now to the end of the year, how to do it, which are how to create the buzz and to work on the cross-channels. So this is regarding the brand.

Talking about the products, the key with -- as you know, we have a new designer in place, the new shoe collection will hit the stores at the beginning of April. So we can't wait to have it, particularly the shoes. But the coordination in terms how to impact the product and the assortments is being done really with a GLOCAL approach. So, operating like a global brand, but with a very strong local assortment and definition of the key items.

In May, we are going to have a new buying season and at that point 50% of the collection would be universal and 50% would be now tailored for the local need. And as you probably remember or recall, we reduced dramatically the number of SKUs for the following season. So, even the product would be less assorted and we are going more deeper in what we do believe and what we're going to communicate to the customer.

So, the realistic approach will be on -- to have a very uniform brand identity with the product, with the marketing, with visual, with the communication, with the digital and Internet overall. And, again, the creation of the collection is really going in a very strong [cross-step] of seasonality, so buy-now and wear-now [fast step].

You see some (inaudible) in front of you of the new shoes that are coming. Some of you probably saw here in Florence, but I would say there is a lot of exciting things happening in the store.

Talking about retail, there are some examples of what we actually did and we are doing in the stores. You have some idea, but still we have less furniture, there will be more display, we will bring the merchandise on the center of a store, we will make -- we're making the merchandise the king about everything we do. We are adding touch-up of colors, using sofas, or tables, or kind of creating more homely environment. You have some example on this presentation. We are changing the display tools of the visual, so to create and to display all the accessories, some eyeglasses, sunglasses, scarves et cetera, will be a more cross-merchandising presentation in order to implement the [UPT unit] transaction. So our store is not organized anymore by compartment and department, but more using the cross-selling approach. The visual composition is much more fun and much more dynamic. Even now our windows are changing from a very structured expression to become more flexible and more fun to have the ability to focus on the product, to make that product the key of everything we do.

We have some example on page 16 of the changes we did in Florence. Actually we did in Milan, with two men, women shops. We did in London and in Paris. We're going to do -- it's happening now as we speak in New York and in [Greenland]. So, in the last stores all of these newness and adjustment are happening as we speak. And that is a very exciting thing. And as you can see, on page 17, a completely different and powerful product presentation.

Going and talking about the people, there are two things happening. We are having a very highly experienced hiring coming to the organization. We'll have a new CEO will join the Company in March 1, for Japan, coming with a new Head of Marketing and with a new Head of HR. Japan is a very important market for us, and being kind of the key of our selling point for all China and in Asia. As a result, Japan is a very important market where we will succeed in the run rate opportunity there.

At the same time, I think there is great opportunity to see and to reward the talent within the organization and to do internal promotion, as we did.

Talking about the supporting center, as you know, there are two key areas that we are covering now; one is merchandising, going across category, but there was a traction that we didn't have before, that now is working on the assortment, on the buying, on the worldwide buying, at the same time a person in charge of marketing and (inaudible) communication as before, and really with a great experience on the digital side.

A new person is coming on board, that is a new (inaudible) who is in charge of [retail] will come in the middle of April from, again, a very strong digital experience, because innovation is going to be -- is the key of everything we are going to do.

We just got the approval from the Board to change the MBO system to have a (inaudible) path of the MBO, and even the structure of this MBO will be based on the performance -- not only the local performance, but will be based on the performance of the entire organization in order to inspire a team effort, a team work, and how to win altogether. We are implementing the training and the hiring process of the training of our people in the stores and in the entire organization and [staff] is going to be implemented before the first half. And, overall, again, the approach to the people and to create focus on what we are doing and to promote and force the organization and people expertise, the strategy that is happening continuously as we speak. So, things are seem to moving in the right direction. We are moving fast. I believe on being able to move very, very fast, because the market is what it is and in fact, it's a new mantra in the organization.

Okay, now it's your turn on putting questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Nicky Cheung, MainFirst.

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Nicky Cheung, MainFirst Bank AG - Analyst [2]

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I've got three of them. First of all, your gross margin in the fourth quarter was down 10 basis points, and could you talk about the moving parts of the gross margin, particularly in the fourth quarter? And the second question relates to the inventory position, it was up 6.7% year-on-year, in 2016, well ahead of sales, and should we expect more clearance activities in the first half of 2017, and how should we think about the gross margin evolution, because of that? And as a percentage of sales, I think the inventory level has been highest since 2009. The last question relates to the retail KPI. The new retail store concept, I think it has been tested for a quarter already. Could you talk about any retail KPI improvement within the pilot stores, for example, the Florence flagship? Thank you very much.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [3]

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As far as the gross margin, you are right, in the fourth quarter, we lost very minimal amount of gross margin, only 10 basis points. And this is certainly related to the activity we had in order to decrease the inventory. As you can see from the number, the impact that was very, very limited. Because we want to continue with this kind of approach also in 2017, I believe that the gross margin will be only moderately affected by these activities. The idea is we had in November is to decrease the inventory in quite a smooth way in order not to affect the brand, but on the contrary, to be more organized on the secondary channel. And I must say that even in this initial portion of 2017, things are going into the right directions.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [4]

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Talking about the retail KPIs, I would say is a work in progress. And what we are monitoring very closely are particularly, beside the Florence was the first one, has really come in Iran, and the other stores in Europe, we are seeing positive outcome, we are monitoring the traffic and the unit per transaction and the conversion rate. Well, we have a system in place that we are implementing -- keep implementing more and more for the balance of the chain. Again, it's still soon start, because are not comparable, but I would say for the first 11 weeks of our retail calendar, our like-for-like performance are on the positive side. That is a good news that we started in the fourth quarter.

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Operator [5]

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Elena Mariani, Morgan Stanley.

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Elena Mariani, Morgan Stanley - Analyst [6]

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Now, my first question is on the wholesale. There has been a huge amount of volatility over the past few quarters and I was wondering if you could help us understand the moving parts there and perhaps also to quantify the contribution from the different segments, such as US Department Stores, Travel Retail and so on? And also, what should we expect in terms of wholesale evolution in 2017, please?

My second question is around your business plan and what you've just laid out for the current year. How should we translate this into numbers? Should we expect 2017 to be a year of transition, where you will be mostly investing in A&P, e-commerce, your new store concept, therefore, perhaps sacrificing a little bit your margin evolution? I think that at the moment, consensus is expecting 5% topline growth, 40 basis points EBITDA margin improvement. Is this something you are comfortable with?

And lastly, I have a question on your medium-term EBITDA margin evolution. In the past, you had a target of approximately 25%. Given your expectations around strong topline growth in the next two, three years, would you be comfortable in reinstating these targets and when do you think this level could be achievable? Thank you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [7]

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I can start from the wholesale. Wholesale composition, as you said, one part of it is a department store, particularly in the US. And the Travel Retail is a big business for us, particularly in Asia, for example in Korea. So this is -- the seasonality of the wholesale is due to the design over-shipment, or -- which are the influence of the traffic, for example, in the duty free and we are re-monitoring very closely, for example, this kind of flexibility. And what's happening in the industry, particularly in the Travel Retail is, I think Korea lately is an interesting scenario. On the other hand, for example, in the US, the department stores, we have a stock program to replenishment the -- to replenish the best item. So there is a lot of seasonality there as well. For example, talking about the US was quite good in the fourth quarter and in the first couple of months of 2017, there's been a little slowdown. But again, it's the seasonality, but we try to capture more and more, working closely with our partners.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [8]

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As far as the investment, clearly, all the activities that Eraldo was presenting to you require a certain amount of investment in terms of hiring, in terms of our CapEx, A&P, extra investment and so on. And clearly, the 5.4% increase in OpEx in the fourth quarter is reflecting this attitude. And clearly, the results will come with some time lag. The products, for example, the new products will be available on the stores only starting from April. So we spent some amount of money in October, November, and we will see the results in April, May.

I believe that especially in the semiannual, June 2017, probably you will not see a big improvement in the result, because the results will arrive only a month after month. Because (inaudible) company in implementing all these actions is very, very strong. You have listened to the list of the activities made by Mr. Poletto. And I believe that the result [will have]. Of course, another important aspect will be the market. If the market is -- everyone today is expecting will improve certainly the results, especially as I said in the second portion of the 2017 should come.

The EBITDA target, you know that well, and thank you for your appreciation. You know the Company style. When we had only 10% in EBITDA, we said [20%]. And actually we ended in the range of 22%, 23%. Next step is 25%. And I believe that for the time being, this is a target clearly and I'm sure that you already did the exercise. If you inject extra revenues, as during the Investor Day, the Company described it clearly, you will arrive to something better than 25%, but for the time being 25% is the next step. And then, hopefully, as it happened in the past, the Company overachieved the goal.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [9]

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The 25% is definitely the goal and the way to get there is a combination of working of the like-for-like performers, or the same network performers and to get focused on what we have. And secondly, with a narrower assortment, with much more focus on the product to increase the sell-through at a full price. So this will be a combination of implementing the retail KPIs, as you said.

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Operator [10]

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Annelaure Bismuth, HSBC.

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Annelaure Bismuth, HSBC - Analyst [11]

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I just wanted to come back on the 5% sales growth and 40 basis point EBITDA margin meant for 2017. Can you comment on the current consensus expectation? My other question is on the one-off SG&A. So what are the one-off SG&A line related to management changes, can you give us a clarification on that? And what do you plan in terms of CapEx for full-year 2017.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [12]

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Could you please repeat the first two questions? Sorry, I think we missed that. The line is not so clear, Sorry.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [13]

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So we have understood that you're asking for the CapEx in 2017. And we can say that it will be on the range of EUR90 million, but unfortunately, the line went out when you were asking the first question.

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Annelaure Bismuth, HSBC - Analyst [14]

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Yes, sorry. I'm just wondering, can you comment on the current consensus expectation in terms of sales and EBITDA margin for full-year 2017, please? And my other question was about the one-off SG&A -- the one-off (inaudible) to the management changes in the SG&A line, can you give us a bit of clarification regarding that? Thank you very much.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [15]

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Okay, of course, now we are just recognizing the 2016 results and probably it is too early to talk about 2017. It's better to wait at least couple of months. What we can say is certainly it's a positive upward trend we noticed during the last quarter 2016 is continuing, as we said, probably even -- especially in the retail level in a strong manner. So we are pleased about the current trend. And probably about the extra cost related due to the management change, which happens, is that your question?

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Operator [16]

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Hermine de Bentzmann, Raymond James.

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Hermine de Bentzmann, Raymond James - Analyst [17]

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I have a few questions as well. The first one is on the ForEx impact you expect on sales for 2017? My second question will be on market dynamics. Have you seen any changes in the beginning of the year in market dynamics, is France doing better and is Japan also doing better, any comment regarding region would be appreciated? Lastly, my question would be on store opening, what do you plan for 2017? Thank you.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [18]

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As far as the ForEx, of course, the situation could change if the currencies will move in different position. But as of today, the coverage we had is $1.10, $1.11 for the US dollar and almost JPY1.20 for the Japanese yen, which means that we will be -- if the currencies remain as they are today, a little bit, but we do not worry too much about these penalization. So negligible impact.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [19]

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Talking about the store opening, is we're talking about for 2017, and again, keep in mind, all of this is very dynamic, the fact by the mall opportunities, we are negotiating some space, that is on the range of 16 stores, [free doors], and there is some -- there are also the free depots. So that is the kind of -- what we're going to do for 2017 and this is a combination of more stores and of direct Travel Retail locations. So, please bear that in mind, of course.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [20]

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And very important is that the size of the majority of these stores is quite limited in terms of selling space. So the investments and the OpEx related to the expansion will be limited.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [21]

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You asked something about Japan, correct?

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Hermine de Bentzmann, Raymond James - Analyst [22]

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So, globally change in market dynamics since the beginning of the year versus Q4?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [23]

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The overall, I would say, since the -- the beginning of the year has been -- depending by the regions, been a little softer, I would say, in the US after the end of the holiday season. Quite positive in China. The trend of Mainland China on the positive side is very, very good and very encouraging. Japan, in terms of like-for-like, has been performing well. And Europe too. Hong Kong is on the soft side still, even if there are some signs that the Chinese are going back. And then Macau, I would say, not so bad considering. And Latam, that is still going very, very well. So the overall situation is quite different between each region.

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Hermine de Bentzmann, Raymond James - Analyst [24]

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Just an additional question, can you remind the like-for-like sales at the end of full-year 2016?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [25]

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The like-for-like was minus 4.4%, but we were -- we recouped some basic points in the fourth quarter, as you probably saw, but it's been a good trend that is continuing in 2017.

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Hermine de Bentzmann, Raymond James - Analyst [26]

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So you expect 2017 to be low-single digit positive or --

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [27]

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We're working on implementing and, of course, we are shooting for a positive comp; that is our objective of course. 2017, I would like to say, 2017 is a transitional year, but we're building and working very hard to make the changes in all the different components of the business, as we discussed. And of course, we will see the results on a daily basis moving along.

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Operator [28]

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Mario Ortelli, Bernstein.

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Mario Ortelli, Bernstein. - Analyst [29]

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The first question is regarding your plan. Can you give us some milestones of key action that we see implemented, in particular when we will see the first new advertising campaign digitally conceived? When we will see the refresh on your website and eCommerce platform? When we will see the appointment of some organizational situation to give more (inaudible) between your four product lines and to boost the cross-selling among product lines? The second question is about your pricing and markdown strategy for 2017. Which price increase have you got in mind, more or less, for this year? And for markdowns, if you are thinking to increase the periods of markdowns, increasing the percentage of sales, if you think to have extraordinary sales in the previous collection? Thank you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [30]

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Okay, going to the campaign, the digital and the eCommerce, the new eCommerce platform that has been a big revamp, because has been [competitively] designed, not on the front end, but really on the aspect [of it] and the navigation for the customers to make more digitally friendly that would be -- the launch in the US in May, so two months from now, and will be rolled out in the next 12 months around the world. The investment and the mindset to be digital already started, but we will be of course creating more and more content on the digital aspect. So that is -- and the campaign will be the full campaign. So the new campaign and the -- we already looking on how many [cartels] we have to do, which kind of communication, etcetera, would be, I would say, after the second half, the third quarter of 2017.

Talking about pricing for the year, we are not looking really at price increase, as I said back in February, but we are looking at [of the seven] different price range within the collection, where there is an opportunity to play in the luxury aspect with an even more luxury product. So we are not planning -- we didn't increase the price of the same item. Actually, we had the content, I would say, creativity and ratio in tourist.

Talking about the markdown, of course, we needed to have a leaner inventory, but we are doing in a very cautious way, in order to protect the brand, is to do what is right. So there is no really plan to increase too dramatically the markdown. (inaudible) to be smarter with the planning team, to do what is right of a global scale. And again, it is not only what we have as inventories, either they are received, we were able to adapt for our own channel, were received for 2017, and implementing, working more and more of the open to buy aspect.

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Mario Ortelli, Bernstein. - Analyst [31]

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If I may two clarifications. The first one on milestones and the second one on markdowns. On the milestones, are you thinking to introduce a new professional, a new creative department and if yes, especially for which product category he will be tasked? And the second one about markdowns, on your sales of 2016 in the retail channel, which percentage was made full price and which percentage in markdown? Thank you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [32]

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Talking about the creativity, particularly now we have a strong payment, we are going to have somebody in charge of women leather goods, in terms of creativity, that is coming on board soon. And talking about the markdown, again it depends by the cost, it depends by where we are, etc. So as an average, we are not really making gigantic changes or adjustments. We are just monitoring the inventory and their promotion in a smarter way, put it this way.

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Ernesto Greco, Salvatore Ferragamo SpA - CFO [33]

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We expect to present to the customers more billing products, which means that very likely you will see going forward a reduction on the markdown, because we will maintain the same markdown level for the previous collection items, while the new ones, probably will be offered at very limited markdowns.

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Operator [34]

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Thomas Chauvet, Citigroup.

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Thomas Chauvet, Citigroup - Analyst [35]

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I have two questions, please. The first one, Mr. Poletto, did I hear correctly at the beginning of your presentation that you said the retail like-for- like turned positive in January and in February. So, you saw that, obviously the first positive quarter since probably the end of the first half of 2015, so over 18 months. So it's an important turning point for you. Can you be a bit more specific about what the trend has been in January, February in retail like-for-like, please?

And secondly, coming back to a question on wholesale, can you comment a little bit on the outlook for the year, both in the US department store and travel retail? I didn't get your answer earlier. Remember, the fourth quarter saw your wholesale business turning back to slightly positive territory, but it was down 20% or so in Q3, when you seem to hold back inventories. Can you explain what the situation is and whether there is no -- maybe for the bad surprise to come in wholesale for the year ahead, that there is no major downsizing, cleaning-up plan that you haven't discussed with us in February, and that could impact your wholesale business later in the year?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [36]

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Okay. Talking about retail, the like for like, we are seeing, again, sale week 11 on the retail calendar, a low-single-digit positive, but I will say it is a good news. In depends by, say, the country as we discussed before, because we are saying before about Mainland China and Europe and Japan in the positive side, that was referring to the like for like. Very often when I refer to the numbers, I refer to the like for like as an approach.

Talking about the wholesale, of course, there is a lot of seasonality when you compare Chinese New Year this time was January 28, instead of February. So we had to monitor for the wholesale channel, that inventory in the department stores in general, not only for our brand, in which it is. And for the travel retail, of course, it is impacted by the travel -- the tourists, the Chinese New Year did impact [prices] probably for the fourth quarter in terms of additional. I think just to add one thing, if you think about South Korea and what the Chinese government is doing with the Visa in terms to reduce the amount of Chinese -- giving Visa to the Chinese to travel to South Korea, that is naturally something that we are monitoring very closely.

Again, the calendar of the wholesale is completely different and there is a lot of uncertainty there, of course, but, for example, (inaudible) in terms of having the stock program, we feel the bestseller (inaudible) is one of our competitive advantage in that market. Of course, the department stores, the investment for the local transformation, store closing or consolidation et cetera. So there is a lot of -- there is uncertainty there. That is our job to work very closely with them and with a retail mindset to try to have the proper assortment in the right place with them.

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Operator [37]

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Annelaure Bismuth, HSBC.

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Annelaure Bismuth, HSBC - Analyst [38]

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I just wanted to come back on the SG&A line. Sorry, the line was very bad. I just wanted to know what were the one-off related to the management changes? My other question is on the market, in your expenditure as percentage of sales, what do you plan for full-year 2017, please? Thank you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [39]

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In 2017, there is more than -- we are optimizing the investments, so it is not a huge investment for the moment, but we are kind of getting more focused on what we do, and there is still opportunity and the percentage is around 5.5%.

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Annelaure Bismuth, HSBC - Analyst [40]

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And regarding the SG&A line and the one-off related to management changes?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [41]

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The management changes, sorry, we missed the first part.

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Annelaure Bismuth, HSBC - Analyst [42]

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Yes, regarding the one-off thing [in] the SG&A line regarding the management changes?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [43]

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Actually the one-off related to this item was already booked in the 2016 P&L. Now, when we say different costs for the organizational changes, because the new activities will require some additional profiles and expertise, but probably the bulk of these extra investments were already done in the fourth quarter and in the first quarter of 2017. So for the rest of the nine months 2017, you will not see any major additional investments in this respect.

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Annelaure Bismuth, HSBC - Analyst [44]

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But what was the amount of full-year 2016, please?

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [45]

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The amount for 2016 was probably in the range of EUR3 million, EUR4 million, because we had really one-off expenditure and some additional, for example, recruiting expenses, which are related to the new person which we hired.

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Annelaure Bismuth, HSBC - Analyst [46]

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So you said EUR3 million, sorry, I didn't --

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [47]

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Yes, something -- probably EUR4 million actually.

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Operator [48]

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Thank you. We don't have any further questions. Over to you.

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Eraldo Poletto, Salvatore Ferragamo SpA - CEO [49]

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Okay. So the next meeting with the Company will be just at the end of July, in which the Company will present the semiannual data. And this is for me a very good occasion to thank you for the stimulus, support and the time you have spent with me and really thank you to all of you. Thanks Ernesto for your great, amazing contribution to this brand. Bye-bye, greeting.

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Operator [50]

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So that does conclude our conference for today. Thank you all for participating. You may now disconnect.