MILAN — A one-time gain on a property sale was the main reason for a 13.8 percent jump in Giorgio Armani SpA’s 2003 net profits, according to the company’s just-published annual report.

Armani released its 2003 revenue and profits in April, showing a 13.8 percent jump in net profits to 133.6 million euros, or $150.97 million, on a.3.5 percent decline in consolidated sales to 1.26 billion euros, or $1.42 billion. Like many other fashion companies, Armani blamed the revenue slide on a combination of factors, including SARS, the threat of international terrorism and the appreciation of the euro against the dollar and the yen.

Dollar figures are converted from the euro at the average exchange rate for the year 2003.

Excluding the one-time gain, Armani’s earnings before interest and taxes, released for the first time in the annual report, declined 2.3 percent to 181 million euros, or $204.5 million. Armani said it booked 22.1 million euros, or $25 million, in extraordinary income from its real estate subsidiary Immobiliare Fondazione Capocotta Srl. An Armani spokesman specified Capocotta sold a “non-strategic” piece of property located near Rome to government officials.

That one-off gain lifted profitability below the operating level. In fact, pretax profits grew 9 percent to 217.3 million euros, or $245.6 million.

Elsewhere in the report, Armani expressed an optimistic outlook for 2004.

“Despite the complex international scenario that is heavily impacted by the instability in the Middle East, the economy showed signs of recovery during the first months of 2004, in particular in the U.S. and Far East. Consumption propensity is rising and the luxury goods sector is starting to benefit from the upturn in international tourist flows,” the company said, adding it was confident in its financial structure and diversified product range.

“This optimism is more than justified in the light of 2004 first-quarter group figures, which show a considerable and steady rise in retail sales in key international markets,” Armani said.

Armani’s report also released figures for wholesale volume that show a 3.5 percent slide in sales to 1.63 billion euros, or $1.84 billion, which the company attributed primarily to the appreciation of the euro against the dollar and the yen.Geographically speaking, Italy and the rest of Europe made up the bulk of wholesale revenues. Sales in Italy grew 3.3 percent to 286 million euros, or $323.2 million, while those in the rest of Europe were essentially flat, rising 0.9 percent to 591 million euros, or $667.8 million. A strong euro took its toll in North America and the Far East. North American revenues dropped 14.8 percent to 402.8 million euros, or $455.2 million, while those from the Far East shed 5.2 percent to 185.2 million euros, or $209.3 million.

Sales from the rest of the world rose 4.4 percent to 166.8 million euros, or $188.5 million.

In terms of wholesale turnover by product category, clothing sales were the biggest contributor, slipping 0.8 percent to 864 million euros, or $976.3 million. Cosmetics and fragrances were the second-biggest revenue generator, with sales rising 4.2 percent to 440.8 million euros, or $498.1 million, boosted by the launch of the Emporio Armani Night fragrances.

Eyewear turnover dropped 34.2 percent to 154.5 million euros, or $174.6 million, as Armani switched licensees to Safilo from Luxottica and opted for more exclusive distribution. Revenues from watches and jewelry grew 15.4 percent to 93 million euros, or $105.1 million Other products’ sales fell 2 percent to 79.6 million euros, or $89.9 million.

The breakdown of wholesale turnover by brand stayed pretty much the same as it was in 2002. The signature Giorgio Armani line generated 31 percent of revenue, while younger Emporio Armani accounted for 27 percent. Diffusion line Armani Collezioni made up 19 percent. AJ/Armani Jeans and A/X Armani Exchange made up 15 and 7 percent, respectively.

Elsewhere in the report, the company detailed that it made 37.9 million euros, or $42.8 million, worth of investments, most of which went toward store refurbishment. The company also reduced head count to 4,599 employees from 4,712 at the end of 2002.

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