LUXURY: Morgan Stanley cut its earnings estimates on six European luxury goods stocks as it forecast a weak Christmas season and expressed fear about the consequences of a potential war in Iraq. The bank slashed earnings and sales targets for Bulgari, Gucci, Hermès, LVMH Moët Hennessy Louis Vuitton, Richemont and Swatch. Morgan Stanley said 2003 sales growth for the six firms should come between 2 percent, for Bulgari, and 5 percent, for Swatch. High-flying Burberry was a notable exception for which the investment firm raised expectations. "The prospects for the industry look considerably worse since the Bali tragedy, not better," wrote analysts Claire Kent and Mandy Deex. "Indications on the Christmas season do not look good — data from high-end Japanese department stores shows that October sales disappointed; the U.S. is hardly showing the expected rebound." The possibility of a war in Iraq was of particular concern to the analysts: "Neither our own revised 2003 nor the consensus forecasts incorporate the impact of a possible war with Iraq," they said, which, "if prolonged, could further hurt consumer confidence and tourism, both of which are vital for a healthy luxury market. We would almost certainly have to cut our 2003 forecasts again if there were a prolonged war with Iraq."... The slower pace of tourism pulled sales growth at LVMH MOET HENNESSY LOUIS VUITTON down to 1.7 percent during the third quarter as sales reached $3 billion. The French luxury firm’s net profits fell 10.5 percent during the first half ended June 30, to $208.8 million, but LVMH said that its expects operating income, which advanced 19 percent in the front half of the year, to grow even faster in the back half. LVMH sales were up 2.2 percent, to $8.76 billion, in the first half of the year.... After dropping 42.2 percent in its first quarter, GUCCI GROUP N.V.’s second-quarter profits were down 55.1 percent, to $41.8 million, as revenues fell 6.9 percent to $563.4 million. Gucci division revenue slumped a larger-than-expected 14.2 percent, or 7.5 percent on a constant currency basis, to $358.7 million from $417.95 million the year before. The group trimmed its earnings forecast for the year to $2.54 a share versus the $2.74 achieved last year....BURBERRY GROUP PLC continued its upward climb in the first half ended Sept. 30, generating a 15 percent sales increase to $432.4 million, but extraordinary items, mostly attributable to its initial public offering in July, dragged its net income for the period down 36 percent to $25.3 million. Excluding special charges, earnings would have reached $52.6 million, 34 percent higher than the previous year’s mark. Accessories grew by 26.2 percent to $119.3 million from $94.5 million while women's wear climbed 16.7 percent to $144.6 million from $123.9 million. Accessories now account for 28 percent of total volume, compared with 25 percent in the corresponding period last year.... Net income for COMPAGNIE FINANCIERE RICHEMONT AG fell 18.5 percent, to $132 million, during the first half ended Sept. 30 as sales declined 3 percent to $1.78 billion. Johann Rupert, executive chairman of Richemont, said the results were in line with the company’s expectations, and added he was cautious about the second half. "We live in a period of chronic uncertainty in terms of global events," he said, adding that he expected the rate of decline in operating profit to improve during the next six months. "Such a view is, of course, predicated upon there being no further deterioration in market sentiment as a consequence of events outside our control."... HERMES INTERNATIONAL logged a 6.1 percent increase in first-half profit, to $93.1 million, as sales moved ahead 2.5 percent, to $567.5 million, principally on the strength of volume in Asia. New stores are planned for Hyundai, Korea; Aix-en-Provence, France; Nuremberg, Germany, and Naples, Italy. Leather goods, with sales of $179.4 million, accounted for 31.4 percent of total first-half sales.... TOD’S SPA saw net income drop 6 percent in the nine months ended Sept. 30 to $30.3 percent from $32.3 million in the year-ago period despite a 10.3 percent sales increase to $287.3 million. Geographically, sales in Italy, Tod’s biggest market, rose 7.2 percent to $134.4 million. Revenue from elsewhere in Europe advanced 19.4 percent to $91.8 million, while sales in North America were flat at $44 million. Sales in Asia and the rest of the world grew 19.9 percent to $17.2 million. Turning to the group’s brands, Tod’s revenue grew by 7.5 percent to $168.9 million while Hogan revenue advanced by 7.8 percent to $76.6 million. Clothing line Fay saw the largest leap in sales, albeit from a smaller base, rising 25.4 percent to $40.3 million... Cost-cutting at BULGARI boosted third-quarter net income, which rose 74 percent, to $14.1 million, as sales dropped 0.7 percent in the period to $181.3 million. Watch sales bounced back after double-digit declines in the first half of the year.

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