BULGARI NET GAINS 34.8% IN FIRST HALF
MILAN — The Rome-based Bulgari luxury goods group said Thursday that first-half net profit rose 34.8 percent to $14.1 million (24.4 billion lire) from 18.1 billion lire a year earlier.
Sales in the six months reached $137.2 million (237.1 billion lire), up 27 percent from the first half of 1996 and up 33 percent at constant exchange rates.
Bulgari chief executive officer Francesco Trapani described the company’s business as growing at a solid, consistent pace, with growth evenly distributed across all its products categories and geographic markets.
“We may be slow to get going, because we work in a prudent way to build a solid business, but year after year we are getting more profitable,” Trapani said in a telephone interview from Rome. He attributed the growth to the performance of Bulgari’s new product categories, and in particular to sales of its new watch, Solotempo, and its new line of rings, XL.
Bulgari’s operating profit jumped 54.8 percent to $17.8 million (30.8 billion lire) in the first half from 19.9 billion lire.
Analysts were pleased with the report, which was better than they expected.
“Some of the stores that Bulgari opened a while ago are now coming into profit,” said Paul Gordon, a luxury goods analyst with IMI-Sigeco.
“People don’t just pop in to Bulgari shops, and so it takes longer for their sales to grow than for other brands, such as Gucci. But when they do, margins grow quite rapidly as well.”
Bulgari opened five stores in the first half, in Abu Dhabi, Kobe, Melbourne, New York — on Madison Avenue — and on board the cruise ship Silver Cloud, where it has a boutique. As reported, Bulgari also signed an agreement with the Ong group to acquire control of its three stores in London and 51 percent of its two shops in Singapore.
Although Bulgari didn’t break out sales figures for each product category, it said its fragrance sales rose 38 percent in the first six months to represent 14 percent of total sales, up from 13 percent. As of the first half, watch sales represent 45 percent of Bulgari’s total sales, while sales of jewelry — previously Bulgari’s core business — have moved into second place at 39 percent.
Trapani said he wasn’t too worried about the problems affecting the luxury goods market in Southeast Asia due to a slump in Japanese travel.
“There’s a lot of talk now about the Asia effect, which is hurting everybody,” Trapani said. “But I’m really not too troubled about it, because for us it represents about 31 percent of the business; we aren’t dangerously overexposed,” he said.
“Furthermore, in Japan, we saw an increase of 24 percent in the first half and even higher increases in July and August in Bulgari stores alone,” Trapani said.
The six-month report didn’t immediately affect the Bulgari share price Thursday, because the news was released after the Milan stock market, where Bulgari is traded, had closed. Bulgari stock closed Thursday at $6.08 — or 10,533 lire — down 2.1 percent from 10,759 lire on Wednesday. The stock had declined in a general movement affecting the luxury goods market after Gucci released its first-half report Wednesday warning of slowing growth due to the cutback in Japanese tourism in such key markets as Hawaii and Hong Kong.
Gucci stock took its big hit on Wednesday, when it dropped 10 7/8 to 47 3/8 on the New York Stock Exchange. On Thursday, the slide continued but moderated as Gucci slipped another 3/4 to 46 5/8. The biggest luxury goods company of them all, LVMH Moet Hennessy, also had a rocky week after releasing first-half results that disappointed analysts. Traded over the counter in the U.S., LVMH dropped 2 7/8 to 43 on Tuesday, picked up 3/8 on Wednesday and then eased 1/4 to 43 1/8 Thursday.
As for upcoming developments at Bulgari, Trapani noted that the firm is moving into several new product categories. It has just launched its first collection of eyewear, produced by Luxottica, which will be in stores in early November. Its first collection of leather bags will be introduced in Bulgari stores in Italy and the U.S. in November. Silk scarves for women will also be in stores in November, while silk ties for men will be making their debut before Christmas.
Finally, Trapani said the company was still actively searching for acquisitions in the luxury goods sector. The Bulgari executive said he was looking at several companies and confirmed a report that he had talked to cashmere manufacturer Manifatture Assocaite Cashmere, which produces the Malo and Gentry Portofino brands but said he didn’t think they would reach an agreement because the controlling Canessa family isn’t interested in selling.