By  on November 15, 2007

MILAN — A slight recovery in Japan and strong jewelry sales boosted Bulgari SpA in the third quarter.

Net profits for the three months ended Sept. 30 rose 19.6 percent to 40.8 million euros, or $55.9 million, the company said Wednesday. Sales for the quarter advanced to 257.9 million euros, or $353.3 million, up 7.9 percent. Sales increased 12.9 percent at constant exchange rates.

Bulgari chief executive officer Francesco Trapani expressed a somewhat positive outlook for the coming months, citing the subprime mortgage rate crisis in the U.S. and its potential trickle-down effects for the world's economies.

"We should have a good Christmas, barring some type of financial problem [in world economies]," Trapani told WWD. "But everything so far indicates that things are going in the right direction."

Trapani said Bulgari is on track to post full-year sales and profit growth of about 12 percent at constant currency rates if there are no extraordinary economic events.

Bulgari's third-quarter earnings before interest and taxes rose 9.4 percent to 46.3 million euros, or $63.4 million. The company noted that operating costs grew 7 percent to 120 million euros, or $164.4 million, as it hired new personnel for stores.

Bulgari, like many other European luxury brands, has suffered in a sluggish Japanese market, but the third-quarter numbers showed some improvement, albeit on fairly weak comps. Third-quarter sales were flat at 56.3 million euros, or $77.1 million, compared with a 2.3 percent drop in the year-earlier period. Stripping out the effects of currency, third-quarter sales this year would have grown 9.2 percent.

Still, Trapani expressed caution regarding the Japanese market, adding sales there went "fairly well" last month.

Bulgari hopes to win over even the most jaded of Japanese customers with two new flagships. Earlier this month, Bulgari opened a modern "twin store" in Tokyo's Omotesando neighborhood featuring angular walls and the brand's first cafe. In two weeks, Bulgari will open its 10-floor Ginza Tower featuring a bar, restaurant and VIP shopping area.

Elsewhere in the world, the company's sales in Europe rose 8.8 percent to 101.7 million euros, or $139.3 million, while those in the Americas grew 12.4 percent to 42.6 million euros, or $58.4 million. Revenues from Asia excluding Japan rose 28.6 percent to 45.9 million euros, or $62.9 million.In terms of product categories, sales of accessories spiked 29.4 percent to 19.5 million euros, or $26.7 million. The company has been working to broaden its handbag offering and even open dedicated retail stores. Last month, Bulgari feted the most recent of these boutiques on Rome's Via dei Condotti.

Third-quarter jewelry sales, including those of top-selling pavé diamond and gold collection Parentesi, grew 13.7 percent to 105.3 million euros, or $144.3 million.

Watch revenues for the quarter fell 1 percent to 71.1 million euros, or $97.4 million, a drop Bulgari attributed to a shortage of some technical components. The company said it plans to overcome this sourcing problem by strengthening its vertical manufacturing capabilities.

Perfume sales rose 3.6 percent to 54.7 million euros, or $74.9 million. Trapani noted Bulgari's skin care line, which bowed in Italy last month, is selling "very well."

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