Luxury purchases out of style
FASHION retailer Salvatore Ferragamo has seen a drop in local sales of about 30 per cent this year and is not expecting much to change next year, chief executive Ferruccio Ferragamo says.
'This has been a difficult year,' he said.
'For 1999, I don't think we are going to grow in the Orient.
'Worldwide it will be another difficult year.' He said that local sales were down by about 30 per cent, in line with the experience of other luxury goods retailers.
Earlier this year, the Italian maker of luxury goods and shoes said poor Asian sales were likely to bring this year's revenue down 5 per cent, despite an increase in business in the United States. Asia accounts for about 30 per cent of all its business.
Consolidated revenue for the company grew from 516 billion lira (about HK$2.43 billion) in 1994 to 869 billion lira last year.
Ferragamo is the latest fashion retailer to admit to the scale of the retail downturn in the region. Local retail sales have fallen 20 per cent on last year and the luxury sector is facing a particularly difficult time.
Not only is there less money around, but for those that do have the cash, extravagance has gone out of fashion.
Worldsec Securities retail analyst Jean Hydleman said the drop in the retail sector had forced many in the luxury sector, including Dickson Concepts, to introduce more downmarket or second-stream brands.
That downturn is now beginning to have a big impact on some of the big names of fashion. Gucci reported a second quarter drop of 7.6 per cent in September, while LVMH Moet Hennessy Louis Vuitton saw sales drop 7 per cent in the first half.
Mr Ferragamo said the company had not closed any shops in the past year and now had nine stores in the SAR, after merging two outlets in summer last year. He believed the company would survive the tough times without significant restructuring.
'I enjoy it when things are difficult,' he said. 'It is healthier for the company.' The drop in Japanese tourism has played a large part in the fall in sales. Many international fashion houses rely heavily on sales to the Japanese, both at home and abroad. Some analysts estimate that Japanese consumers account for about half of Gucci's sales worldwide.
The percentage was 'not as much but certainly close to that' at Ferragamo, Mr Ferragamo said.
'Not only in Hong Kong, but worldwide we have felt the impact from the [drop in] Japanese consumers,' he said.
'We are suffering in Florence, in Rome, in Beverley Hills.' Helen Johnstone