Salvatore Ferragamo was once the world’s buzziest luxury shoemaker, but the storied ‘sleeping beauty’ is having trouble coming back to life.
Since launching a plan last year to boost its relevance with millennials and reverse falling sales and profitability, Salvatore Ferragamo has issued a profit warning and lost its chief executive, Eraldo Poletto, who exited the Italian luxury shoemaker in March, after less than two years in the role, fuelling speculation of a potential sale.
Chairman Ferruccio Ferragamo, the eldest son of Mr. Salvatore Ferragamo, took temporary charge of the brand, saying that while the company would take the time it needed to find the right replacement for Poletto, he intended to hold the reins for as short a period as possible, ruling out a sale.
“The sale of the company is out of the question,” said Ferruccio Ferragamo at the time.
Now, the Florence-based, family-owned firm has appointed ex-Gucci executive Micaela Le Divelec as general manager and postponed the selection of a new CEO. At the group’s annual shareholders meeting on Friday, Ferruccio Ferragamo was granted full powers to manage the company.
His son James was named vice chairman and one of three “strategic managers,” along with Le Divelec and chief finance officer Ugo Giorcelli.
Earlier this week, market reports suggested the brand was establishing an executive management committee to lead its revamp, citing sources close to the company, who said it could take up to 18 months to find a new chief executive.
On Friday, Ferruccio Ferragamo said the firm was pressing ahead with the turnaround plans it presented in February of last year “without changes or twists.” But not everyone is as sanguine.
Salvatore Ferragamo was once the world’s buzziest luxury shoemaker, associated with old Hollywood stars like Audrey Hepburn.
Its founder was a true innovator, birthing major footwear trends like the wedge and the platform.
But after his death in 1960, the brand grew dusty and conservative.
Ferragamo enjoyed a resurgence in the 1980s but again lost its cachet with consumers and slipped into a long slumber which it has struggled to shake off.
The company almost doubled sales in the six years to 2015 while net profit rose threefold. But recent performance has been worrying. In February 2017, the company pledged to grow revenue at twice market rate from 2017 and 2020, backed by a drive to update its product offering and increase store performance.
But in fiscal 2017, the company generated revenue of €1.39 billion, up only 1.4 percent over 2016, while net profit sunk 42.4 percent year-on-year.
“While the original Salvatore Ferragamo was glamourous and associated with Hollywood stars, the Ferragamo that Poletto found was falling short on product innovation and drifting into the mainstream with communications,” explained Luca Solca, head of luxury at Exane BNP Paribas, in a March 2018 report.
It’s unfortunate, noted Solca, that Poletto’s exit occurred just as Ferragamo was starting to show a degree of promise on the creative side of the business with a co-ed runway show during the last Milan fashion week — staged by women’s creative director Paul Andrew and men’s design director Guillaume Meilland — that was far better received than the brand’s previous output, attracting kudos for its coherence, product focus and sense of colour.
“Mr. Poletto had a tough task. It may only take a kiss in fairy tales, but in the real world, it takes time to revive a ‘sleeping beauty’ and bring a dusty brand like Salvatore Ferragamo back to life,” said Solca. “Eraldo has fallen into the trap of promising too much too soon.”
Ferragamo clearly still has a long way to go to bring back the buzz of its storied past. The brand is widely perceived as serious and boring. And despite the positive reactions to its latest show, some question whether Ferragamo has a winning formula on the creative side. While Paul Andrew is rightly credited with having brought a fresh perspective to the brand, he is ultimately a footwear designer, with little experience in designing women’s ready-to-wear collections.
What’s more, Ferragamo has long struggled to do what Italian rivals Gucci and Valentino have done so successfully: translate the energy of the runway into a strong merchandising experience. And while there’s certainly more the brand could do to boost its communications strategy, like resurrecting its movie-star past by connecting with young Hollywood, for example, it’s difficult to make this matter — especially given Ferragamo’s small media muscle compared to competitors — if the brand isn’t creating product that people actually want to buy.
Solca prescribes an “innovation stratagem” to drive product innovation, overcome brand inertia and boost desirability with young luxury consumers who increasingly drive the market and whose thirst for newness and novelty is growing. This could involve capsule “collection snippets” endorsed by modern-day movie stars from China and South Korea, as well as Europe and the US, he explained.
Some also point to weakness on the business side, saying Ferragamo has long lacked modern management and has a company culture that suffers from deep conservatism and rigidity in a fast-moving market that demands daring, speed and flexibility.
It was not entirely reassuring that Ferruccio Ferragamo said on Friday that he hoped the brand’s new chief executive would come from within the company, though thankfully he did exclude the possibility that he or she would be a member of the Ferragamo family.
Indeed, the brand’s conservatism is also a product of the family which owns 70 percent of the company. “One can understand that, when one thinks they have all their eggs in one basket — if something goes wrong they are in a difficult position,” explained Solca.
But comprehensible or not, the Ferragamo family may be holding back much needed progress. “The fact that demand today is driven by young Chinese consumers keen on newness is putting the conservative approach to a handicap,” said Solca.