By  on September 14, 2007

MILAN — Despite higher investments and promotional expenses, Bulgari SpA posted double-digit profit growth in the first half and forecast continued sales momentum for the rest of the year.

Net profits for the first six months ended June 30 rose 32 percent to 58.4 million euros, or $71.8 million at average exchange rates for the period. Sales, as reported in July, advanced 8.9 percent to 487.8 million euros, or $600 million. The company said revenues would have grown 15 percent at comparable exchange rates.

"The first half was a period in which Japan continued to suffer, which is a bad thing since it is such an important market for us, but we performed extremely well in the rest of the world and managed to compensate," Bulgari chief executive Francesco Trapani said in an interview.

Trapani expressed some concerns about the continued weakness of the yen, but remained optimistic about the appetite for timepieces, jewelry and other luxury items in the second half. He said a strong Christmas season will allow Bulgari to post full-year net profit and sales growth (at constant currency rates) of between 10 and 12 percent.

First-half earnings before interest and taxes gained 17 percent to 61.7 million euros, or $75.9 million. Profit margins increased despite the fact that the jeweler made larger investments in retail and other operations. Bulgari's profits also grew as the company lifted its retail prices, a measure that was intended to partially compensate for the strength of the euro against the dollar and yen. Bulgari's prices have grown by an average of four percent over the last year, Trapani said.

"A good businessman always wants to sell his goods at the highest price," he said.

First-half operating costs rose 7.7 percent to 194.4 million euros, or $239.1 million, as Bulgari built and renovated its store network. As of June 30, Bulgari had 232 stores, 136 of which it owns. Later this year, it will fete a new towering flagship in Ginza in a bid to jump-start business in the lackluster Japanese market.

Advertising and promotional expenses grew 3.9 percent to 55.3 million euros, or $68 million.

Bulgari specified that second-quarter net profits grew 31.5 percent to 34.4 million euros, or $46.4 million, while revenues increased 7.7 percent to 262.6 million euros, or $354.5 million.The company's net debt rose to 154.8 million euros, or $190.4 million, from 115.5 million euros, or $142.1 million, a year earlier. Bulgari said the increase stemmed from a variety of factors, including the payment of an 86.9 million euro, or $107 million, dividend in May and a strategy to exploit a weak dollar and stock up on precious stones and other raw materials.

"We decided to take advantage of the current prices and stock up now," Trapani said.

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