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Bulgari Profits Fall 45 Percent

Jewelry firm sees tough year ahead.

MILAN — Bulgari SpA is to cut jobs, reduce its number of products and close unprofitable stores this year after the company’s earnings fell 45.1 percent in 2008.

This story first appeared in the March 12, 2009 issue of WWD.  Subscribe Today.


“[This year] will be a very difficult year,” Bulgari chief executive officer Francesco Trapani told WWD in an interview on Wednesday, without detailing the specifics of the plan. He also declined to give forecasts, saying, “We don’t feel able to give a number of any meaning because the situation is so very complicated.”

Net profits for the year ending Dec. 31 nearly halved to 82.9 million euros, or $122 million, from 150.9 million euros, or $206.8 million, in 2007, which Trapani attributed to a “drastic” and “unforeseen” 15 percent drop in fourth-quarter sales brought on by the global financial crisis. He also cited unexpected losses on exchange-rate hedges. The figures missed analysts’ estimates.

Full-year revenues slipped 1.4 percent to 1.08 billion euros, or $1.59 billion. The company did not break out fourth-quarter figures.

Dollar figures are converted at average exchange rates for the periods to which they refer.

After raising prices in 2008, Trapani said they would likely stay flat this year, while noting Bulgari had upped its perfume prices “a little bit” worldwide in January, “although this was already slated for some time.”

He said Bulgari would focus on managing its cost base “even more rigorously” to make efficiency savings, while underlining the measures would not compromise the luxury brand’s product and service quality.

“We are slated to open around 10 stores this year, which we signed contracts for prior to [the collapse of] Lehman [Brothers], but we will close others, because, at this point, we cannot allow ourselves the luxury of having stores which neither have a strategic value nor make a profit nor have a realistic possibility of doing so in the allotted time,” Trapani said.

He specified that management was working on reducing investments and keeping the inventory at cash neutral levels this year and cash free in 2010. He also anticipated Bulgari’s debt would remain at about 304 million euros, or $385.7 million, as it was at the end of 2008.

Trapani added: “Facing equally challenging situations in the past, Bulgari has always been able to evolve, becoming one of the main players in the worldwide luxury market.”

Revenues fell in all categories except perfumes, where sales rose 12 percent to 248.4 million euros, or $365.5 million.

Watch sales were hit hardest, falling 10.6 percent to 263.7 million euros, or $388 million, while sales of jewels, Bulgari’s core business, fell 2.5 percent to 448.4 million euros, or $659.7 million. Accessories sales slipped 1.5 percent to 83.1 million euros, or $122.3 million.

Looking at revenues by region, the picture was similarly negative, with only the Middle East and Asia Bulgari’s biggest market, recording a gain, although the latter was boosted by favorable currency fluctuations. Sales increased 9.1 percent to 63.3 million or $93.1 million, in the Middle East, and edged up 1.6 percent to 436 million euros, or $641.5 million in Asia. Sales decreased 1.3 percent to 421.7 million euros, or $620.5 million, in Europe; dropped 11.7 percent in Italy, and fell 12.5 percent to 154.4 million euros, or $227.2 million in the Americas.

Bulgari proposed a dividend of 0.10 euros a share, or 13 cents, from 0.32 euros, or 47 cents, a share the previous financial year.

The company issued the results after the close of the Milan Bourse. Bulgari’s stock closed down 1.2 percent to 3.21 euros, or $4.07. The shares have fallen nearly 55 percent in the last 12 months.

In other Bulgari news, a St. Maarten-based jewelry dealer has sued Bulgari Corp. of America, alleging the luxury brand reneged on a deal to turn it into a Caribbean showcase for Bulgari wares. In a breach of contract complaint filed on March 5 in federal court in Manhattan, Joe’s Jewelry International says Bulgari approached it in October 2007 with a three-year plan to expand its presence in the retailer’s showroom in Philipsburg, St. Maarten. The suit alleges that on Dec. 1 Bulgari told Joe’s Jewelry that it planned to sever their business agreement at the end of that month. Bulgari, the complaint says, entered into a new distribution agreement with a direct competitor. Joe’s Jewelry is seeking at least $4 million for breach of contract, legal fees and other unspecified damages.

Bulgari did not respond to a request for comment.