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Currency, Gold Prices Hit Bulgari Earnings

Exchange rates and higher gold prices bit into Bul­gari SpA's fourth-quarter earnings, but the company managed to post double-digit growth in the full year.

MILAN — Exchange rates and higher gold prices bit into Bul­gari SpA’s fourth-quarter earnings, but the company managed to post double-digit growth in the full year.

Bulgari said Thursday that full-year 2006 net profit grew 15 percent to 134.3 million euros, or $169.2 million. The company did not break down fourth-quarter profits but, based on results from the first nine months of the year, fourth-quarter net profit dropped 8.8 percent to 55.8 million euros, or $72 million. Dollar figures have been converted from the euro at average exchange rates.

“I am reticent to make comments regarding profit in the last quarter,” chief executive officer Fran­cesco Trapani told WWD. “We are not concerned about that because we have already generated enough profit this year.”

Revenue last year advanced 10 percent to 1.01 billion euros, or $1.27 billion, a figure the company released in January. Bulgari’s operating profit last year rose 9.2 percent to 155.9 million euros, or $196.4 million.

In the current year, Trapani forecast that net profit would increase between 8 and 12 percent, despite continued weakness in the Japanese market and the volatility of the yen. A strong euro to yen and dollar exchange rate crimped results last year. At constant exchange rates, sales would have risen 12 percent.

“We are a little more worried about the exchange rate with the yen because the exchange rate with the yen hurts us and that’s all,” he said.

‘‘Meanwhile, the exchange rate with the dollar has both negative and positive effects for us because we buy raw materials in dollars.”

Trapani said that a recent drop in gold prices reassures him. “I don’t see a critical situation,” he said. Still, Bulgari has raised its retail prices between November and January to compensate for the higher costs of gold and, to a lesser extent, diamonds.

Bulgari is also betting on retail expansion to boost sales. This week, the company opened its refurbished Fifth Avenue flagship in New York. It is planning two major Tokyo openings this year, which Trapani said will boost momentum in a sluggish and competitive market: an Omotesando store in November and a Ginza tower in November or December.

At the end of 2006, Bulgari had 228 stores, 133 of which were directly owned. Trapani said the company will continue to invest in the development of the retail network. Product launches, including a skin care line, will also be critical to growth, he said.

“Like the year just ended, 2007 will be characterized for Bulgari by a relevant commitment for the advertising and promotional support to the important product launches that will follow one another during the year and by a further acceleration of the investments for the development of the retail network,” Trapani said in a statement.

He again denied that his family’s company is for sale, responding to speculation that Bulgari could be a takeover target.