WWD.com/business-news/financial/bulgari-narrows-guidance-second-quarter-profits-fall-88-percent-1697734/

MILAN — Bulgari SpA reined in its full-year guidance to the lower end of estimates after second-quarter earnings fell 8.8 percent, hurt by a drop in watch sales and a slowdown in the Americas and Italy.

This story first appeared in the August 4, 2008 issue of WWD.  Subscribe Today.

“Given that difficult macroeconomic conditions in key markets are continuing, I believe it is both reasonable and prudent to restrict the range of the increase in our revenues…operating profit and net profit to the lower band of the guidance already given to the market,” Bulgari chief executive officer Francesco Trapani said.

In March, Bulgari forecast full-year sales, operating profit and net profit increases of between 8 and 12 percent on a comparable exchange rate basis, pending no further deterioration in market conditions.

For the three months ended June 30, net profits fell to 31.4 million euros, or $49.1 million at average exchange, on revenues that gained 4.8 percent to 274.7 million euros, or $429.4 million.

Operating profits declined 19.8 percent to 29 million euros, or $45.3 million.

Revenues from watches decreased 11.1 percent to 65.6 million euros, or $102.6 million, which Bulgari attributed to production problems connected with the late delivery of components and the absence of the entry price line Carbongold, whose sale was completed last year.

Trapani said he was “confident” that these difficulties would be “at least partially overcome” in the second half, and that sales would be “positively affected” by the introduction of new lines, which were well received at the Basel watch fair. Deliveries of these lines will begin in the second part of this year.

Sales of jewelry, which represented the majority of group turnover (more than 40 percent), accelerated during the quarter, gaining 5.2 percent to 118.3 million euros, or $184.9 million. The growth came even though the category was up against a tough comparison: Last year’s first-half results included the extraordinary $13.5 million sale of a piece of high jewelry at the New York flagship in April 2007.

Revenues from perfumes and high-end cosmetics jumped 25.5 percent to 61.2 million euros, or $95.7 million, which the company attributed to the “excellent results” obtained from the launch of the new men’s fragrance Aqua Pour Homme Marine, which hit shelves in June.

Accessories sales rose 2.1 percent to 20 million euros, or $31.3 million.

Despite a 4.5 percent fall to 32.6 million euros, or $51 million, in Italy, Europe as a whole gained 11.7 percent to 108.9 million euros, or $170.2 million, buoyed by “brilliant” results in France and Germany.

Revenues in the Americas fell 21.1 percent to 38.5 million euros, or $60.2 million, although Bulgari noted that the decline should be seen in the context of a 50.2 percent gain in the second quarter of 2007.

In line with expectations, sales in Asia grew 9.8 percent to 109.5 million euros, or $171.2 million, including a 6.7 percent gain in Japan, which accounted for around half the region’s total.

Revenues in the Middle East and other countries gained 10.6 percent to 17.8 million euros, or $27.8 million.

Bulgari released the results after the close of trading in Milan, where the jeweler’s share price dipped 1.8 percent to 6.91 euros, or $10.78 at current exchange.�