By  on March 30, 2006

MILAN — Bulgari fell a bit short of its 2005 profitability target, but chief executive Francesco Trapani said he's upbeat about a 32.3 percent surge in fourth-quarter net profits and a good start to the current year.

Net profits rose 7 percent to 116.4 million euros, or $145.5 million, for the 12 months ended Dec. 31. The jeweler was targeting 10 percent growth for the year. Trapani said the jeweler wasn't able to fully compensate for softer sales earlier in the year, which he blamed on the terrorist bombings in London and the U.S. hurricanes.

"We weren't able to recuperate everything we lost [in terms of sales]," the ceo said in an interview.

Sales advanced 10.5 percent to 918.5 million euros, or $1.1 billion, in line with preliminary revenue figures released in January, as well as Bulgari's initial forecast. Currency impact was negligible; sales would have grown 10.6 percent at constant exchange rates. All dollar figures have been converted from the euro at average exchange rates for the period to which they refer.

On a fourth-quarter basis, net profits grew 32.3 percent to 61.2 million euros, or $72.8 million, while revenues advanced 13.2 percent to 311.2 million euros, or $370.3 million.

Trapani said 2006 sales should grow by 8 to 9 percent, while net profits should advance at a similar pace "in the high single digits." That's the same forecast he made at the end of January.

"I don't have any particular concerns. The first quarter [of this year] is going well, but we prefer to be cautious," he said.

Full-year operating profits rose 8.4 percent to 142.8 million euros, or $178.5 million, despite higher promotional and advertising investments to support the launches of new products, such as the Assioma watch. Those expenditures rose 20.6 percent to 116.3 million euros ($145.4 million), or 12.7 percent of sales. Bulgari said that those investments should drop to 12 percent of sales this year.

Bulgari isn't just spending on ads. The company is making major retail investments, including the refurbishment and expansion of its Fifth Avenue store and the building of a 10-story tower in Tokyo, which will house both the brand's biggest-ever store and Bulgari's Japanese headquarters. The brand is also rolling out a series of accessories-only boutiques. Last year, Bulgari opened two of these, in Osaka and Tokyo, and there are plans for another three or four in Asia and Europe.

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