Italy's OVS sees room for clothing price cuts as inflation eases
02/02/2023 14:37
By Elisa Anzolin
MILAN, Feb 2 (Reuters) - Italian mass-market clothing
retailer OVS OVS.MI plans to keep prices steady or even cut
them in 2023 as it sees inflationary pressures on logistics, raw
materials and energy easing.
Freight costs have fallen drastically in the last three or
four months, OVS Chief Executive Stefano Beraldo said.
Beraldo told Reuters in a telephone interview that he
expected a reduction of around 30% in freight costs and OVS had
already kept them under control through medium term contracts.
Cotton and other raw materials prices are dropping too and
OVS, whose competitors include H&M HMb.ST , is expecting a
weighted average commodity decline of around 20% for the group
and lower energy prices this year.
"We will not increase prices, we will keep prices steady in
some cases and in some others we will be able to pass down a
part of these benefits to customers, especially in the child
segment," Beraldo said on Thursday.
OVS, which last year increased its prices, reported a net
sale increase of 11% to 420 million euros in the October-January
quarter, with core profit up more than 10% year-on-year.
The only cost that is expected to increase this year is
labour, with national contracts under discussion for renewal.
"We believe that these increases will occur but they will be
limited given that the inflationary scenario is on the way down"
Beraldo said, adding that wage costs could increase around 2-3%.
Beraldo added there will be no layoffs at OVS, which has a
9.4% market share in Italy.
H&M's profits were almost wiped out in the
September-November quarter by soaring costs, which the Swedish
company held back from passing on in full to cash-strapped
customers.
Beraldo expects demand to hold up as a loss of purchasing
power has pushed more customers into the value segment.
OVS, which earlier this week called off talks to acquire
department store group Coin, will keep looking at organic growth
and other smaller M&A opportunities, he said.
"We will open other stores this year, but probably fewer in
number compared to the past", Beraldo said.
"And I keep looking at external targets that can be brands
or small networks to continue with our consolidation of the
Italian market".
(Reporting by Elisa Anzolin, editing by Alexander Smith)
((elisa.anzolin@thomsonreuters.com; 0039 0266129692;))