By  on September 27, 2005

MILAN — Bulgari's first-half profits slumped as the company spent more on advertising and promotional activities, while Tod's posted double-digit profit growth for the period.

Bulgari's net profit for the six months ended June 30 dropped 15 percent to 28.9 million euros, or $35 million, as revenue rose 10.1 percent to 389.2 million euros, or $471 million. Sales figures were released in July. All figures are at average exchange rates.

Bulgari chief executive officer Francesco Trapani said the results are "in line" with company expectations. He reiterated a forecast that full-year net profit will grow between 11 and 13 percent, while sales, excluding the effects of currency exchange rates, will advance between 10 and 12 percent.

Overall, Trapani voiced an optimistic outlook. He's hoping the economic impact of hurricanes Katrina and Rita will be short-lived and local, like that of the London terrorist bombings in July. Trapani said business in London picked up again in September. Elsewhere, he noted improving conditions for the European market and promising signs from Asia.

"I'm seeing a very lively Japan in September," he said. "China, despite being a small revenue generator for us, is beginning to show interesting results that are above expectations."

Advertising and promotional expenses for the period rose 28.7 percent to 55.3 million, or $66.9 million. Trapani said the company normally concentrates advertising expenses in the second half of the year but chose to spend earlier to support new products like Assioma timepieces, a new white gold and diamond jewelry collection (see separate story, page 9) and the Te Rouge fragrance.

Operating profit excluding advertising and promotional expenses rose 10.7 percent to 93.8 million euros, or $113 million. Operating profit after those costs dropped 7.8 percent to 38.5 million euros, or $46.6 million.

Debts rose to 128.4 million euros, or $155 million, compared with 65.6 million euros, or $82.7 million, a year earlier due to a larger dividend payment of 65 million euros, or $78.7 million, double that of 2004, and higher product inventories ahead of product launches later this year.

Tod's net profit for the half year rose 44 percent to 20.3 million euros, or $24.6 million. Revenue grew 22 percent to 236.9 million euros, or $287 million. Sales figures were released in July.Tod's chairman and ceo Diego Della Valle said profit and sales growth confirm the "effectiveness of the group's strategy." He, like Trapani, voiced an upbeat outlook for the rest of the year.

"The outstanding start of the sales of our winter collections now in the stores as well as the positive signals of the next spring-summer order collection make me fully confident on the full-year results," he said in a statement. (For more on Tod's, see page 10.)

Earnings before interest and taxes rose 48.1 percent to 35.5 million euros, or $43 million. Pre-tax profit advanced 45.9 percent to 35.8 million euros, or $43 million.

Elsewhere, Tod's said its first-half investments totaled 11.4 million euros, or $14 million, including the refurbishment of stores in New York, Düsseldorf, Hong Kong and Geneva.

As of June 30, Tod's had a network of 105 directly owned stores and 37 franchised stores. The company said all store openings in the first half of the year were in Asia, including two stores in mainland China.

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