By  on May 16, 2006

MILAN — IT Holding SpA returned to profitability in the first quarter, as stronger accessories sales boosted margins at the group.

Net profit for the three months ended March 31 was 5 million euros, or $6 million, compared with a year-earlier loss of 2.4 million euros, or $3.1 million. Sales rose 8.6 percent to 211.5 million euros, or $253.8 million.

"The positive trend in the first quarter of 2006 and of orders for the fall-winter 2006-07 season make us optimistic about the future," IT Holding president Tonino Perna said in a statement

All dollar figures have been converted at average exchange rates for the period to which they refer.

IT Holding said that excluding revenue from its D&G license, first-quarter sales would have risen 18.1 percent. Last July, Dolce & Gabbana severed its 12-year partnership with IT Holding for D&G, taking production of the diffusion line in-house. IT Holding's production contract ends with the fall-winter 2006-07 season.

IT Holding doesn't break down revenue for its licensed brands D&G, Just Cavalli, Versace Jean Couture, Versace Sport and C'N'C Costume National, which collectively make up 62.3 percent of revenue. IT Holding said that collective sales of these diffusion lines were virtually flat at 131.8 million euros, or $158.2 million.

Since losing the D&G license, IT Holding has channeled its efforts on its in-house brand Gianfranco Ferré and cashmere company turned fashion brand Malo. Ferré's first-quarter revenue climbed 4.5 percent to 32.8 million euros, or $39.4 million. Malo sales rose 10.3 percent to 11.8 million euros, or $14.2 million.

IT Holding's accessories unit, which makes bags and shoes for all of the company's brands, posted a 57.7 percent jump in first-quarter sales to 32.8 million euros, or $39.4 million. Sales rose as the company opened nine accessories-only stores in the period, bringing the current total to 15 boutiques. All of the stores, which are named +IT, were opened through franchisees.

The company said that high-margin accessories sales lifted profits. Operating profit rose 59.8 percent to 21.1 million euros, or $25.3 million.

Geographically, IT Holding does almost 76 percent of its revenue in Europe, where business suffered in some countries. First-quarter sales in Italy rose 14.8 percent to 95.6 million euros, or $114.7 million, while revenue from other European countries declined 4.2 percent to 64.5 million euros, or $77.4 million.

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