Despite beating market expectations with a rise in net profit of 29.4 percent to €34.1 million in the third quarter, Bulgari is cautious about results for the fourth quarter. Chief executive Francesco Trapani said comps will be tough in the last three months of the year as the company faces the holiday season. Sales rose 9.6 percent to €239 million, falling well within analysts’ expectations. Operating profit for the quarter surged 32.8 percent to €42.3 million, seemingly unaffected by increased spending on advertisements, including its perfume campaign featuring Kate Moss. Elena Sottanella, analyst at Abaxbank, admits the operating results were a surprise. “The overall results were above the consensus,â€? she said. “However, there was no reason for the consensus being as conservative as it was, considering the easy comps.â€?
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Sales increased in all categories except accessories. The company attributed the drop of 16.4 percent to €15 million in the third quarter of 2005, to a shortage in production. Higher than expected sales in the past 12 months had cut into production capacity and third party retailers were penalized to correct the situation. Bulgari said that the problem had already been resolved. Meanwhile, jewellery sales rose 9.7 percent in the third quarter, watch sales leapt 14.8 percent and perfume sales grew 19.3 percent, compared with 19.4 percent during the same period last year.
In geographical terms, the company achieved significant growth in the US and Europe , excluding Italy , the Far East and the Middle East . Only Japan and Italy showed slowdowns in the third quarter, although Japan enjoyed a strong performance for the first nine months of the year with a 21 percent increase. “I am not surprised by the current growth slowdown in Japan , a mature market where a further expansion is less likely to be achieved,� Trapani said in a statement. He added that Bulgari expects a moderate increase during the next 12 months and, starting from 2008, the Japanese market “should show a more aggressive growth rate also thanks to the new important retail projects that will be completed by the end of 2007.�
Sottanella agrees with the company’s cautious outlook for the last quarter. “The fourth quarter 2006 faces tough comps, with watches showing their first sign of recovery in the same period last year.â€? She does believe, however, that the company is being overly cautious regarding its full-year forecast of 10 percent growth and anticipates growth of 11 percent, taking into consideration the depreciation of the dollar.