Italian Luxury Firms Post Varied Results

Italian luxury players Bulgari, IT Holding and Marzotto released a mixed bag of results for 2002.

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MILAN — Italian luxury goods players Bulgari, IT Holding and Marzotto released a mixed bag of results for 2002 as the Iraqi war and volatile market conditions made executives reluctant to make forecasts about the year ahead.

This story first appeared in the March 28, 2003 issue of WWD.  Subscribe Today.

Comments from Bulgari and Marzotto indicated that the advent of war this month has had a chilling effect on recent business conditions, characterized by Marzotto as “an abrupt slowdown.”

While Marzotto’s profits fell by nearly a quarter, Bulgari’s rose at a double-digit clip and IT Holding’s more than doubled.

Bulgari said its net profit in 2002 rose 11.6 percent to $81.3 million from $72.8 million in 2001 thanks to advertising reductions and improved efficiencies. Sales rose 1 percent to $826.6 million from $818.6 million. Dollar figures are converted from the euro at current exchange.

Chief executive Francesco Trapani said persistent market weakness will make it tough for the group to meet its full-year 2003 targets for 10 percent profit and revenue growth.

“I think this week [the market] is worse than it was in 2002. If it continues like this, it will be difficult to reach those objectives,” he said.

Elsewhere, Trapani said Bulgari is on track to open its first hotel, in downtown Milan, in tandem with venture partner Marriott International Inc. in late 2003 or early 2004. There are plans to open six more hotels through 2008 with Marriott.

Trapani said the company is working to chip away at its pile of unsold stock — a problem that has concerned some analysts in the past. Inventory decreased 12.8 percent to $509.7 million from $584.5 million at the end of 2001.

By product category, jewelry sales rose 2 percent to $313.9 million while revenues from fragrances grew 5 percent to $141.6 million. Watch sales dropped 1 percent to $312.9 million.

Geographically speaking, sales in Italy, Japan and the Middle East saw growth while the others declined. Revenue in Italy rose 3 percent to $114.6 million while those in Japan rose 7 percent to $176.2 million.

In Europe, excluding Italy, sales dropped 3 percent to $114.6 million and the Americas shed 2 percent to $123.8 million. Revenue from the Far East excluding Japan dropped 7 percent to $141.8 million.

IT Holding, which owns Gianfranco Ferré, Romeo Gigli, Malo, Exté, Gentry Portofino and Ittierre, reported a hefty 141.8 percent increase in 2002 net income to $23.5 million compared with 2001, as sales rose 24.4 percent to $700.2 million.

Tonino Perna, chairman and ceo, said he expected 10 percent sales growth for the current year, unless “more tragic events” connected to the war in Iraq were to occur.

Although optimistic, chairman and chief executive Tonino Perna said he was cautious, given the war and the general economic situation. Perna said that, unless “more tragic events” happen, he expected a 10 percent growth in sales this year.

However, he was inclined to be less bold with respect to plans, announced last fall, to launch Ferré jewelry and watches. That initiative, at least for the moment, has been postponed.

“Now is not the time to enter a market where we have no presence, since there are so many uncertainties,” he said.

Perna attributed the 2002 growth in both income and sales to an integration of the group, a cost-cutting strategy, and its offer of a “modern and competitive product.”

“The market requires luxury and a designer name but with a younger, trendier and more dynamic look and at a more affordable price,” said Perna. “We are reaping the benefits of the acquisitions [of most of our brands] made in 1999,” he added.

Perna said the Ferré project will begin to benefit the company next year. Last fall, Perna said he planned to discontinue the Gieffeffe, Gianfranco Ferré Studio, Jeans and Forma lines this year, and launch a new line simply called Ferré.

IT Holding posted 2002 earnings before interest, taxes and amortization of goodwill and trademarks of $53.4 million, a 65.6 percent increase compared with the previous year. That equates to 7.6 percent of sales.

In 2002, the Ferré brand, fully consolidated by the group by last summer, registered sales of $121.9 million and reported that Ferré licensees garnered sales of $138.9 million.

Perna expressed satisfaction with the growth of IT’s ready-to-wear and accessories division, which grew 17.6 percent and accounted for 86.2 percent of sales.

The eyewear division grew 33 percent and accounted for 9.2 percent of sales. In the second semester of 2002, the first period of activity of ITF, a partnership with Roberto Martone to produce and distribute fragrances, perfumes attained sales of $14.7 million.

Geographically, sales grew in all market areas. Italy, which accounts for 39.5 percent of sales, grew 23.6 percent compared with the year before and other European countries grew 16.1 percent, accounting for 34 percent of sales.

Sales in the U.S. bounded ahead 22.4 percent and accounted for 12.8 percent of sales. Asia and the rest of the world grew 31.6 percent, accounting for 11.2 percent of sales.

“We did not suffer from a post-September 11 or prewar crisis,” said Perna.

During the year, IT Holding invested a total of $42.5 million in the consolidation of Ferré, the expansion of the eyewear division headquarters in Padua and the start-up of its perfume division.

Elsewhere, Marzotto, owner of the Valentino and Hugo Boss brands, saw its 2002 net income drop 24.6 percent to $44.8 million from $59.5 million in 2001 on a slowdown in its wool textile business.

Its acquisition of Valentino last year, and subsequent consolidation of the fashion house’s results, helped the company’s sales rise 1.8 percent to $1.91 billion. In 2002, Valentino posted sales of $85.7 million, greater than the corporate increase.

“The worsening international context, which resulted in the Iraq conflict, has affected the entire world economy, creating an abrupt slowdown,” the company said in a release.

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