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Luxury Has Recovered in 2010. And No Relapse is Looming
Financial year 2010 marked a recovery for the luxury industry, and the first 2011 semester confirms the positive trend, according to the Fashion and Luxury Insight 2011, the annual survey compiled by SDA Bocconi and Altagamma analyzing the 2010 balance sheets of the international fashion and luxury listed companies, presented this morning in Milan.
The report analyzes the balance sheets of 67 internationally renowned listed companies with sales in excess of € 200 million, while preliminary 2011 accounts were available for 48 of them.
Surveyed companies’ sales grew by 10.9% in 2010 (-5.3% in 2009, the annum horribilis for the industry) and the positive outlook is confirmed by the lively dynamics of ROI (12.4% versus 8.3% in 2009), ROE (jumped to 16.5% from 3.5% in 2009), EBIT margin (10% versus 7% the previous year) and EBITDA margin (13.6% versus 11.1%). The average cash generation declined to 8.1% of sales (11.6% in 2009), even if the weight of working capital continued to decrease, to 18.2% of sales. The average trade debtor days were unchanged at 39.
“The 2010 positive trend is confirmed, or even strengthened, by the preliminary 2011 financial data”, SDA Bocconi’s Paola Varacca Capello, co-author of the report, says, “with a single exception. The growth of investments to 6.1% of sales in 2010, from 4.9% in 2009, and the growth of core investments on depreciation to 105.2%, from 83%, suggest that the majority of the players in the industry have been intensifying investments in the development of the core business and in supporting future growth, but the first 2011 data show a decrease of the investments to 3.2% of sales. Sales, anyway, grow at increasing speed, reaching 12.4% in the first half of 2011".
“The companies’ positive performance”, co-author Giorgio Brandazza says, “are due in part to the market recovery, but are also in part the result of the last few years’ policies, aiming at operational efficiency and at a better management of the working capital”. The attention to operational efficiency was confirmed by the paltry growth in the number of stores in 2010: 2%, that is better than the 1% of 2009 but still far away from the 9% of 2008.
“Branded mass market and retailing companies in 2010 obtained a worse performance than high-end companies” Armando Branchini, secretary general of Fondazione Altagamma and co-author of the report says. “Five out of the 10 top performers in sales growth are high-end companies and among them there are the recently listed Salvatore Ferragamo and Prada. Also five out of the 10 top performers in Ebit are high-end companies, among them Prada and Tod’s”.
As in the last few years, firm dimension was crucial for performance: larger firms (sales above € 5 million) showed better ROI (15.6% versus 13.6% for firms with salesbetween €1 and 5 million and 8% for smaller firms) and better EBIT margin (13.3% versus 11.7% and 5%).
The best performing cluster was leather goods.
INDUSTRY FINANCIAL HIGHLIGHTS
Parameter | Average |
Sales Growth | 10,9% |
Return on Investments (Roi) | 12,4% |
Return on Equity (Roe) | 16,5% |
EBIT Margin | 10% |
Asset Turnover | 1,25 |
EBITDA Margin | 13,6% |
Net Cash Flow to Sales | 8,1% |
Gearing | 0,41 |
Current ratio | 2,56 |
Intangible Assets Weight | 16,9% |
Fixed Assets Weight | 43,3% |
Working Capital to Sales | 18,2% |
Trade Debtor Days | 39 |
Core Investments on Depreciation | 105,2% |
Total Investments on Sales | 6,1% |
Source: Fashion&Luxury Insight, FY 2010
TOP TEN BY SALES GROWTH
Company | Country | Cluster | Sales Growth |
Skechers | Usa | Leather Goods | 40% |
Richemont | Eu | Jewels / Watches | 33% |
G-III apparel Group | Usa | Apparel | 33% |
Fossil | Usa | Jewels / Watches | 31% |
Prada | Ita | Leather Goods | 31% |
Salvatore Ferragamo | Ita | Leather Goods | 26% |
Gildan Activewear | Can | Active | 26% |
Hermes | Fra | Leather Goods | 25% |
Deckers Outdoor | Usa | Leather Goods | 23% |
Columbia Sportswear | Usa | Active | 19% |
Source: Fashion&Luxury Insight, FY 2010
TOP TEN BY ROI
Company | Country | Cluster | ROI |
Coach | Usa | Leather Goods | 47% |
Hennes&Mauritz | Eu | Fashion retail | 42% |
Next | Uk | Fashion retail | 32% |
Deckers Outdoor | Usa | Leather Goods | 31% |
Gap | Usa | Fashion retail | 28% |
Fossil | Usa | Jewels / Watches | 26% |
Gerry Weber | Eu | Apparel | 26% |
Guess | Usa | Apparel | 24% |
Inditex | Eu | Fashion Retail | 23% |
Urban Outfitter | Usa | Fashion Retail | 23% |
Source: Fashion&Luxury Insight, FY 2010
TOP TEN BY EBIT
Company | Country | Cluster | EBIT |
Coach | Usa | Leather Goods | 32% |
Hermes | Fra | Leather Goods | 28% |
Deckers Outdoor | Usa | Leather Goods | 25% |
Swatch | Eu | Jewels / Watches | 24% |
Hennes&Mauritz | Eu | Fashion Retail | 23% |
Prada | Ita | Leather Goods | 20% |
Tod's | Ita | Leather Goods | 20% |
Burberry | Uk | Apparel | 20% |
Dior | Fra | Financial Conglomerate | 20% |
Richemont | Eu | Jewels / Watches | 20% |
Source: Fashion&Luxury Insight, FY 2010
TOP TEN BY CASH GENERATION
Company | Country | Cluster | Cash Generation |
Revlon | Usa | Beauty | 38% |
Hermes | Fra | Leather Goods | 24% |
Gildan Activewear | Can | Active | 24% |
Coach | Usa | Leather Goods | 23% |
Swatch | Eu | Jewels / Watches | 21% |
Inditex | Eu | Fashion Retail | 20% |
Tod's | Ita | Leather Goods | 19% |
Burberry | Uk | Apparel | 19% |
Hennes&Mauritz | Eu | Fashion Retail | 19% |
Richemont | Eu | Jewels / Watches | 17% |
Source: Fashion&Luxury Insight, FY 2010
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