Press - Universita' Bocconi

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| 14/10/2014

Fashion and Luxury: International Companies Resumed Investing in 2013

FASHION AND LUXURY INSIGHT WAS PRESENTED BY SDA BOCCONI AND ALTAGAMMA. THOUGH SALES GROWTH SLOWED FOR THE SECOND YEAR IN A ROW, THE SECTOR HAS REACTED BY INVESTING. AS USUAL, HIGH END COMPANIES RECORDED THE BEST RESULTS

During the 2013 fiscal year, growth of large international fashion and luxury companies reported the second consecutive decline, remaining positive, however, at +7.9%. In addition, the sector reacted well by investing more than in the past (the relationship between operational investments and depreciations was 168.6% over 147.6% in 2012). This was announced in Fashion and Luxury Insight, an annual report by SDA Bocconi and Altagamma, which analyzes the financial statements of listed international companies with turnover exceeding €200m.

The industry's profitability decreased, the report showed. This year a sample of 79 companies with a total turnover of €332b was analyzed: the average ROI decreased to 13.5%, over 14.9% the previous year, while the EBIT margin was at 11.5%, over 12.4% in 2012.

"Finances are still the focus of concern for companies," says Emilia Merlotti of SDA Bocconi (Accounting, Control, Corporate and Real Estate Finance Department), co-author of the report. "In 2013 they were able to further reduce financial leverage by bringing the debt ratio on capital to 0.40, which is comparable to 2005 levels. Cash generation, though slightly decreased (10.4% over 10.7% in 2012), remains steady."

"In 2013, a slowdown in the opening of new points of sale was also seen," says Paola Varacca Capello of SDA Bocconi (Strategic and Entrepreneurial Management Department), co-author of the report. "The data stops at 3%, a level that was never before recorded."

The Online Specialists segment had the best performance in terms of sales growth (+27.9%). Jewelry and Watches came in second, with +13.6% and first in terms of ROI, increasing to 17.9%.

"The breakdown of results in the five geographic areas Italy, France, Rest of Europe, North American and Asia," says Nicola Misani of SDA Bocconi (Strategic and Entrepreneurial Management Department), co-author of the report, "shows a complicated year for Italian companies in the industry. In 2012, they had the fastest growth and in 2013 they had the slowest. Even their profitability was slightly lower than average."

Armando Branchini, Vice President of Altagamma and another co-author of the study, says, "a positive aspect is the fact that quality and innovation again proved to be an important factor for success. The high end sector was once again the healthiest segment. High end apparel, for example, recorded a ROI of 20.8%, against 15.2% for apparel as a whole, and sales growth of 18.1% over 8.5%."

The team of authors of Fashion & Luxury Insight is made up of Emilia Merlotti, Nicola Misani e Paola Varacca Capello of SDA Bocconi; Armando Branchini participated on behalf of Altagamma.

INDUSTRY FINANCIAL HIGHLIGHTS

Parameter	Average
Sales Growth	7.9%
Return on Investment (ROI)	13.5%
Return on Equity (ROE)	16.2%
EBIT Margin	11.5%
Asset Turnover	1.24
EBITDA Margin	15%
Net Cash Flow to Sales	10.4%
Gearing	0.40
Current Ratio	2.45
Fixed Assets Weight	18.2%
Intangible Assets Weight	44%
Working Capital to Sales	18.3%
Trade Debtors Days	35.74
Core Investments on Depreciation	168.6%
Total Investments on Sales	6.2%