Luxury brands must adapt to slower growth, warns Italian designer label boss

Jessica Morris
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Salvatore Ferragamo Alternative Views - Milan Fashion Week Fall/Winter 2016/17
Ferragamo's core business is shoes (Source: Getty)

The boss of one of Italy's leading luxury goods makers has warned there will be no let-up in the sector's slowdown, a scenario which firms must adapt to.

Speaking before the Salvatore Ferragamo menswear show at Milan Men's fashion week, chief executive Michele Norsa told Reuters: "Growth will not be as strong as in past years, when the Chinese economy and new markets have been opportunities for the industry."

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Norsa continued that the brand is on track to increase profitability, and will focus on generating more income from its existing products rather than pushing sales. This is because "growth of volumes will be hard to forecast," he added.

Luxury firms previously buoyant growth has been stymied recently by slower economic growth in China, plunging oil prices volatile exchange rates as well as security threats in European cities following last year's terror attacks in Paris which have curbed tourism.

Norsa, who has been at the helm of the luxury group for over a decade, is due to leave by the end of this year. He'll be replaced by Eraldo Poletto, former head of handbag maker Furla.

Ferragamo's shares have more than doubled in value in the five years since the listing, but have slid nine per cent so far this year.

But there was a silver lining for investors earlier this year when Ferragamo reported a larger-than-expected 11 percent rise in core profit for 2015. Nevertheless, it also served up a cautious outlook for this year.

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The industry’s woes have been exemplified by Burberry, whose profits fell last year. Chief executive Christopher Bailey's pay also plunged 75 per cent as the British fashion house failed to meet its profit targets.