Aeffe’s profits down in first nine months of 2019
today Nov 14, 2019
Aeffe’s growth has slowed down in the first nine months of 2019, confirming the trend recorded in H1. The Italian fashion group’s sales have been affected by a troubled economic environment, diminishing especially in the ready-to-wear category, while costs and investments both increased. Only Moschino recorded a sales growth, while Alberta Ferretti and Philosophy lost ground and footwear label Pollini remained stable. As a result, Aeffe's revenue grew by a mere 1.7% between January and September, reaching €269 million (up 1.4% at constant exchange rates).
As for the main economic indicators for the group which also produces under licence the collections of Jeremy Scott and Cédric Charlier, they were mostly negative. Apparel sales, which accounted for 68% of total revenue, were weak, falling by 1.3%, while those of the leather goods and footwear division increased by 9.1%, notably driven by the popularity of Moschino’s accessories. The label is the genuine driving force of Aeffe, accounting for 74% of the group’s total sales.
While Aeffe’s sales slumped, its operating costs - from production to marketing and R&D - all increased, also due to the group's hiring of “key personnel, in order to boost the appeal and uniqueness of the group's labels,” stated Aeffe in a press release. The group also invested heavily to continue to enhance its labels’ market positioning and ensure they enjoy appropriate visibility, and it invested also on resources needed to improve the labels’ e-tail performance.
As a result, net income feel by 16.7%, down from €16.1 million as of September 30 2018 to €13.4 million a year later, without taking into account the effects of the initial implementation of IFRS 16 accounting practices. If these were applied, net income would fall to €13.2 million.
EBITDA reached €46.1 million, a 24% increase compared to the first nine months of 2018. Net of the IFRS 16 effect however, EBITDA was €33.8 million, equivalent to an 8.8% downturn.
In January to September 2019, Moschino generated a revenue of €199.4 million, equivalent to a 4.8% rise at constant exchange rates. Instead, sales for Alberta Ferretti plunged, losing 16.6%, those of the group’s young line, Philosophy by Lorenzo Serafini, lost 3.0% and the licensing business lost 10.3%.
The group’s executive president, Massimo Ferretti, was optimistic: “Given the uncertain market context, characterised by turbulence in countries that are significant for us, we regards as positive the results of the first nine months [of the year], and we believe that the investment plan we began to deploy last year in the areas of R&D, production and marketing will contribute to strengthening the strategic positioning of our labels on the global market,” said Ferretti.
Italy, the leading market for the group based in San Giovanni in Marignano, with a share of sales of 46.5%, struggled however, and posted a 2.9% downturn. Instead, in the period in question, sales increased in all of Aeffe's main export regions: in Europe excepting Italy (up 2.2 %) and in Asia and the rest of the world (up 9.9%), which respectively accounted for 23% and 25% of global revenue. Greater China and South Korea were particularly dynamic, posting sales increases of 8% and 35% respectively. The USA, which accounted for only 5% of Aeffe’s business, were stable, growing by 0.4%.
As of September 30, Aeffe operated 63 directly managed monobrand stores and 176 franchised ones. The retail channel accounted for 27% of the group's revenue in the period, and grew by 8.8%.
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