MILAN — Consumers’ love affair with luxury goods bolstered top-line and bottom-line growth for luxury firms Bulgari and Tod’s SpA.
For Bulgari, a strong performance in its core jewelry and watch divisions, along with healthy sales in all market areas, especially Japan, pushed net profits to 28.3 million euros, or $34.6 million, in the third quarter, up 50 percent from 18.9 million euros, or $23.1 million, in the same period the previous year.
Dollar figures are at the average exchange rate.
Francesco Trapani, chief executive officer of Bulgari, said in a phone interview he was “very satisfied” with these results, which were “very solid” because they were achieved through an expansion of all product categories in all markets. He was pleased with the company’s increase in profits and cost-cutting strategy, notwithstanding a hefty 35 percent increase in ads and communication in the third quarter and a still “uncertain and difficult environment.”
In the third quarter ended Sept. 30, Bulgari’s sales grew 11 percent to 201.6 million euros, or $246.5 million, compared with 181.9 million euros, or $222.5 million, in the same period of the previous year, beating analysts’ expectations. At constant exchange rates, sales would have grown by 13 percent.
Operating profits grew 30 percent to 35.2 million euros, or $43 million, from 27 million euros, or $33 million, in the same period the previous year.
At constant exchange rates, jewelry grew 14.5 percent, and the watch division confirmed the recovery seen in the first half, posting a 24 percent growth. Trapani said this division registered “positive and encouraging signs.” Accessories grew 27 percent and fragrances showed a slight loss, a 5 percent drop, as the company compared this performance with an “exceptional” 48 percent growth in the same period the previous year, when Bulgari launched Omnia.
Trapani attributed the steady performance in all market areas to “the extraordinary strength of the brand and to the exceptional creativity of all new products.” Bulgari is focused on Japan, among other markets, which posted a 32 percent growth, compared with a 23 percent growth last year. Trapani said this market still has “a huge growth potential,” and he plans to continue investments there, following the opening of the company’s megastore in Osaka earlier this month, the 30th and biggest in Japan and second-largest in the world. In 2003, Japan accounted for 22 percent of company sales.
This story first appeared in the November 15, 2004 issue of WWD. Subscribe Today.
The U.S. grew 17 percent and the Far East grew 14 percent. Italy grew 18 percent and Europe, currently a sluggish market for most luxury goods companies, showed an 8 percent loss in the period, although Bulgari noted that this figure was compared with a significant 25 percent growth in the third quarter of 2003.
In the third quarter, Bulgari said it spent 20.9 million euros, or $25.6 million, in advertising and promotional expenses, 35 percent more compared with the same period in 2003. Not taking into account these expenses, operating costs in the quarter were 70.8 million euros, or $86.6 million, up 5 percent compared with 67.5 million euros, or $82.5 million, in the same period in 2003.
Meanwhile, Tod’s SpA attributed its 17.6 percent increase in sales in the first nine months to growth in all brands and all product categories. In particular, Asia showed a robust 62 percent growth.
Net profits were in line with the same period last year, amounting to 22.9 million euros, or $28.1 million, on sales of 336.8 million euros, or $412.9 million.
Diego Della Valle, chairman and managing director of Tod’s, said in a statement that he was “totally satisfied with the excellent results” of the period. “Figures show that sales are accelerating with respect to the first-half results, which were already excellent in themselves, confirming the widening success of all our products on all markets and the major contribution made by expansion of the directly operated store network,” he said.
Earnings before interest, taxes, depreciation and amortization grew 18 percent to 72.8 million euros, or $93.9 million at constant rates. EBIT grew 20 percent to 45.1 million euros, or $58.1 million. Profits before taxes grew 3 percent to 42 million euros, or $54.1 million.
Europe showed a healthy performance, posting a 14 percent growth in the first nine months of the year, not including Italy, which grew 14 percent. The national market accounts for 49.1 percent of sales.
The U.S. grew 6 percent at constant exchange rates. At current exchange rates, sales in the U.S. dropped 4 percent, due to currency fluctuations. Asia grew 67.8 percent, at constant rates, accounting for 11 percent of sales. At current exchange rates, Asia grew 61.7 percent.
The company said sales through directly operated stores were in line with the first-half performance, and grew 28.6 percent in the first nine months of 2004. Tod’s partly attributed this growth to the opening of 11 stores as compared with the end of September 2003. During the third quarter, the company opened two Dev stores in Italy, in Verona and Bolzano; an additional Tod’s store in Milan, located in Galleria Vittorio Emanuele, which was inaugurated with a cocktail party on Thursday, and a new Tod’s store in Osaka, Japan. As of Sept. 30, the company counts 104 directly operated stores and 29 franchised stores. During October, two Tod’s franchised stores opened in Bangkok and Beijing — Tod’s second in China after Shanghai. Next month, the company will open Tod’s first freestanding flagship store in Tokyo, in Omotesando, in line with Tod’s strategy to strengthen its brand image in Asia.