Ferragamo's turnaround is taking longer than expected

In March of this year, Italian luxury footwear artisan Salvatore Ferragamo publicly communicated its strides of an intricate turnaround strategy. Though the 10.8 percent contraction in its operating profit for the fiscal year 2022 was somewhat less severe than initially anticipated, the brand continues to grapple with a deceleration in sales. On Thursday the company said it closed the initial half of 2023 with a 4.8 percent dip in sales and an a 65.4 percent plunge in net profit.

Luxury brands undertaking overhauls are frequently embarked upon a quest to attain the elusive aura of desirability, that very essence propelling select items within their assortments to unprecedented demand. This cachet has been evidenced by the meteoric sales drivers of items such as Gucci's emblematic double G logo belt, Bottega Veneta's puddle boots, and Celine's coveted tote bag. However, Ferragamo has not yet achieved this status.

Despite a meticulously curated Fall 2023 collection under the guidance of creative director Maximillian Davis, Ferragamo’s influence has yet to reach the echelons of the "must-have" pantheon. Endeavors of Mr. Gobbetti, whose prior accomplishments at Burberry might serve as a blueprint for achieving growth, have encountered obstacles, as current investments obscure its successes. The brand's challenges, reigniting its retail and wholesale channels, are yet to translate into a tangible currency of demand amongst the aspirational consumer cohort. The first half of this year saw Ferragamo's retail arm report sales down 5.9 percent, with wholesale contracting 13.3 percent.

Addressing this financial juncture during an earnings call, Mr. Gobbetti said a focus on newness, including new product introductions, and investments in marketing, communication and in-store retail experiences will contribute to strengthening the brand image and to generate interest from current and new customers. “While aware of an increasingly uncertain market context, the choices and work carried out strengthen our commitment to our strategic priorities and our confidence in our medium-term ambitions".

Although the prospect of store closures is not on the table, Mr. Gobbetti said an imperative for optimizing the network is slowly drawing dividends. To date the brand has refreshed 70 of its boutiques and executed logo revamps for 100. Looking ahead, a new women's boutique in Milan's Montenapoleone district is expected to serve as a harbinger for other global flagship transformations.

But however incredible the new store design and experiences, it is vital that customers leave the premises with purchases of its products. Ferragamo's clientele may favour a sophisticated and timeless product, but they are not a trend-seeking audience. Those shoppers that will appreciate its stompy yellow combat boots or minimalist sculptural heels need high brand engagement and desirability to make those as fashion investments.