Ferrari: Profit forecast rises with car customization – 08/02/2023 – Market

Ferrari updated its earnings forecast after an “astounding” rise in buyers adding expensive options to their supercars sent its quarterly earnings up more than 20%.

Despite car sales between April and June this year falling 2% to 3,392 units compared to the previous year, the company’s revenue rose 14% to €1.5 billion and gross profit increased. by a third, to 334 million euros.

The Italian group now expects to achieve adjusted profit of between 1.51 billion euros and 1.54 billion euros this year, up from a previous forecast of 1.45 billion euros to 1.5 billion euros. Its revenue forecast also rose from €5.7 billion to €5.8 billion.

The rise in forecasts is mainly due to the growing tendency for supercar buyers to spend large sums, often tens of thousands of pounds, on customizing their new cars, causing their cost to rise far beyond the already high advertised price.

Custom paint jobs and highly colored brake calipers, which guide the brake pads and are visible inside the wheel, are traditionally some of the most sought-after elements for branding vehicles, all of which ensure high profit margins for the company. One of the options is to pay to have the Ferrari coat of arms stamped on the side of the car.

A growing trend is for buyers to replace normal car parts, such as body panels, with carbon fiber ones. This comes at a much higher cost, but ensures a distinctly different look than ordinary painted aluminum body panels, allowing the vehicle to stand out even in comparison to other Ferraris.

“The decision to revise the guidance upwards was based in particular on the impressive results of the customizations,” said chief executive Benedetto Vigna. Personalization revenue was “greater than initially expected” and held up “across all models, all cars … and all geographies,” he noted.

As Ferrari caps its sales so that its vehicles are rarer, customers are “customizing their cars more and more, like they do their clothes,” Vigna said.

Ferrari generally allows buyers to add specs to their vehicles three or four months before delivery. This allows you to predict with a good deal of certainty that the amount of personalization should be maintained for the rest of the year.

Growing demand for high-cost custom elements has been responsible for rising profits across the luxury car segment. Both Aston Martin and Bentley identified personalization as contributing to their profits this year.

According to Daniel Roeska, an analyst at Bernstein, the amounts being spent by Ferrari buyers with options should also rise, as sales of the four-door Purosangue model and the super-luxury model Daytona SP3 increase.

For Roeska, the fact that Ferrari has exceeded expectations should not surprise its investors. He described the company’s results as a “Groundbreak” effect, though he said some investors might be disappointed that the guidance was only slightly raised.

Ferrari shares fell just under 2% after the disclosure to 284.5 euros.

“Higher revenues and profit margins due to the demand for more options must be offset by continued cost inflation” in addition to higher accounting costs, as the company reduces investments in new models after they go into production, Roeska added.

Translated by Clara Allain