MILAN — Heavy destocking in its wholesale channel, lackluster performance across product categories and the global financial crisis weighed on Bulgari SpA’s bottom line, which showed a net loss in 2009 of 47.1 million euros, or $65.4 million, compared with a profit of 82.9 million euros, or $121.8 million, the year before.
Revenues in 2009 dropped 13.8 percent to 926.6 million euros, or $1.28 billion, compared with 1.07 billion euros, or $1.57 billion, in 2008.
However, Francesco Trapani, chief executive officer of Bulgari, reported an uptick in sales starting with the third quarter of last year. As sales in directly owned stores were “much more buoyant” than at wholesale, the Italian jeweler last year “continued to be extremely focused on reducing costs, investments, debt and stock, providing results that exceeded expectations to the benefit of the financial position,” said Trapani.
Looking ahead, the executive touted major initiatives related to brand image and new products this year. Combined with “a high-single-digit increase in turnover with all channels and product categories performing well” in the first two months of 2010, Trapani forecast a midsingle-digit increase in 2010 sales at comparable exchange rates.
Geographically, while the European market continues to be weak and the Japanese market flat, business in the U.S., South Korea and in Mainland China, Taiwan, Hong Kong and Macau showed strong results in January and February. In a conference call, Trapani said the company is focusing its investments on China and plans to open seven directly operated stores in Asia this year.
Trapani also noted a 3 percent increase in worldwide prices starting April 1 will impact this year’s results.
The executive concluded that Bulgari is committed “to increased efficiency, but will continue investing in order to exploit growth opportunities offered by the market.”
Trapani said the company has been redesigning its entire supply chain, aiming at a more vertical and effective structure. “We should be able to define it in 2010, implement it in 2011 and reap benefits in 2012 and 2013,” said Trapani.
For the full year, the gross margin dropped 16.9 percent to 565.7 million euros, or $786.3 million. The company attributed that to exchange rate trends; the increase in gold prices in 2009, only partially offset by hedging made by the group, and the absence of significant increases in retail prices. In addition, there was the clearance of the Daniel Roth and Gérald Genta product inventories, which followed the integration of the two brands, through special sales with lower profit margins.
Dollar figures are converted at average exchange rates for the periods to which they refer.
In 2009, Bulgari booked extraordinary, nonrecurring costs, mostly related to the integration of the Roth and Genta brands, which amounted to 37 million euros, or $51.4 million.
Last year, all product categories showed a drop in sales: jewelry and watches fell 10.3 and 19.5 percent, respectively. However, watches showed a 20.2 percent growth in directly owned stores in the fourth quarter. In 2009, sales of perfumes dropped 20.1 percent and those of accessories contracted 12 percent. Bulgari has been focusing on the expansion of its accessories category and last week unveiled a collaboration with Matthew Williamson for the launch in September of a capsule collection.
Geographically, revenues fell 16.7 percent in Europe and 27.3 percent in the U.S. Sales in Asia declined 10.1 percent. A bright note came from the Middle East-other regions, which posted a 12.2 percent growth. Bulgari said directly owned stores showed a “highly positive performance” in strategic markets such as China, up 27.7 percent; South Korea, up 32.2 percent, and Australia, up 66.9 percent.
Advertising and promotional costs fell 16.9 percent to 95.6 million euros, or $132.8 million.
As of Dec. 31, the number of Bulgari stores globally totaled 273, of which 166 are directly owned. By the end of the year, the company reduced its debt by 29 percent to 216.8 million euros, or $301.3 million, compared with 303.6 million euros, or $446.2 million, the year before.