MILAN — Double-digit sales growth in the U.S. and Japan propelled Bulgari in the first quarter, but higher advertising expenditures and rising costs bit into operating margins.
First-quarter net profit rose 9.1 percent to 14.7 million euros, or $19.3 million, from 13.5 million euros, or $16.9 million, the year before. Revenue for the three months ended March 31 grew 11.9 percent to 179.4 million euros, or $235 million, from 160.3 million euros, or $200.4 million. Bulgari said sales would have risen 12.8 percent at constant exchange rates.
Dollar figures have been converted from the euro at average exchange rates.
Higher costs reduced the jeweler's operating profit, which slipped 3 percent to 18.3 million euros, or $23.9 million.
Bulgari said higher communications spending, daily management activities, integration of the Hotel Bulgari operation and consolidation of the recently acquired jeweler Crova caused operating costs to swell 21.4 percent to 98.7 million euros, or $129.3 million. Promotional and advertising expenses rose 48.3 percent to 23.6 million euros, or $30.9 million, as Bulgari launched a series of new products including Aqua, a men's perfume.
Bulgari chief executive officer Francesco Trapani said the strong growth in all product categories made him optimistic the jeweler will meet previously set targets. In March, when Bulgari released full-year 2004 numbers, Trapani forecast 2005 sales growth of 10 to 12 percent at constant exchange rates, barring any extraordinary market developments. At that time, he said profits would grow at a higher rate.
By product category, jewelry sales grew 9.1 percent to 72.2 million euros, or $94.6 million. Watch sales rose 1.8 percent to 50.3 million euros, or $65.9 million, but the company said the segment suffered as retailers postponed orders ahead of the Basel watch fair to view new products. The new Aqua fragrance helped propel perfume sales 20.3 percent to 34.1 million euros, or $44.7 million. Revenue from accessories, a category that Bulgari has been pushing, advanced 27.9 percent to 17.5 million euros, or $22.9 million.
On a geographic basis, sales in Italy rose 21.4 percent to 21.7 million euros, or $28.4 million, while those in other European countries fell 0.8 percent to 37.9 million euros, or $49.6 million. Revenues from the Americas grew 29.4 percent to 30.3 million euros, or $39.7 million. Sales in Japan advanced 18.3 percent to 47.2 million euros, or $61.8 million, while those from the rest of Asia grew 7.7 percent to 32.1 million euros, or $42.1 million. Sales in the Middle East and other countries lost 8.2 percent to 10.2 million euros, or $13.4 million.
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