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Bulgari Sees 19 Percent Profit Gain

Growth of the jewelry and watch categories across all geographical markets helped boost Bulgari's first-quarter performance.

MILAN — Growth of the jewelry and watch categories across all geographical markets helped boost Bulgari’s first-quarter performance and drove chief executive officer Francesco Trapani to express optimism and expectations of “an 8 to 9 percent growth” for the year.

Bulgari’s net profits in the first quarter rose 19 percent, to 18.2 million euros, or $21.8 million, compared with the same period in the previous year, as sales grew 13.6 percent, to 203.9 million euros, or $244.7 million. At constant exchange rates, sales would have grown 11.9 percent. All dollar figures are at the average exchange rate.

“The results achieved through this first quarter of the year in all product categories and in all countries make me optimistic also for the forthcoming months and confirm that we are going in the right direction,” said Trapani in a statement issued on Thursday. “In accordance with the guidance given to the market at the beginning of the year, in fact, I expect for 2006 — without extraordinary events — an 8 to 9 percent increase at comparable exchange rates for turnover and net profits.”

Steps taken by the company to increase production efficiency and achieve a stronger vertical integration resulted in a 15 percent growth in operating profits, to 21.8 million euros, or $26.2 million.

Jewelry, which accounted for 39 percent of sales, grew 8.2 percent at constant exchange rates, compared with the same period last year. Watches continued the growth trend registered in the last quarter of 2005, posting a 13.1 percent increase in sales. The company said the new collection BVLGARI BVLGARI presented at the Baselworld Watch & Jewelry Show last April was well received and that the category showed further growth potential. Watches accounted for 28.6 percent of sales.

Sales in the fragrance division dropped 1.9 percent, but Bulgari said this data was compared with a record first quarter in 2005, when the men’s fragrance AQVA was launched, which posted a 19.8 percent growth compared with the first quarter of 2004. The company said it expected an improvement in the category for 2006 with the launch of new fragrances in the second half of the year.

Accessories grew 44.2 percent, accounting for 12.5 percent of sales. As reported, Bulgari has been investing in the development of this division, rolling out a series of accessories-only boutiques. Last year, Bulgari opened two of these, in Osaka and Tokyo, and there are plans for another three or four in Asia and Europe.

This story first appeared in the May 12, 2006 issue of WWD.  Subscribe Today.

All geographical markets showed healthy growth, but Bulgari said in the statement that “great satisfaction came from the robust and continuative sales performance in Japan,” which grew 25.3 percent. Sales in Europe and Italy rose 27.1 and 13.9 percent, respectively, and the Middle East/others grew 22.5 percent at current exchange rates. Growth in the U.S. was slower, up 8.4 percent. Bulgari attributed the 24.7 percent drop in the Far East to weakness of some markets and its recent strategy to better control product distribution. Last year, Bulgari shuttered some wholesale accounts in Asia to prevent the reselling of stock to Japan.

Operating costs, excluding promotional and advertising expenses, reached 87 million euros, or $104.4 million, up 16.7 percent from 74.5 million euros, or $97.5 million, in the first quarter of 2005. Bulgari attributed this increase to investments in retailing, which included the refurbishment and expansion of its Fifth Avenue store and the building of a 10-story tower in Tokyo. The Tokyo site will house both the brand’s biggest store and the company’s Japanese headquarters. Promotional and advertising expenses were stable at 23.6 million euros, or $28.3 million.

Bulgari also said Alberto Nathansohn would be appointed corporate finance and administration executive vice president effective May 15. Nathansohn, 48, who will replace Ernesto Greco, was previously ceo of Eurofly Service SpA and before that worked at Pirelli Group.