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Milan: Bvlgari SpA, the world's third- largest jeweller, reported lower profit and cut its forecast after slowing US and Italian demand crimped sales of Assioma watches and Astrale necklaces.
Second-quarter net income dropped 9 per cent to 31.4 million euros ($49 million), the Rome-based company said last week. That about matched the 31.3 million euro median of eight analysts' estimates compiled by Bloomberg.
Chief Executive Officer Francesco Trapani said sales and profit would grow between 8 and 10 per cent this year excluding exchange-rate effects, the low end of a previously announced range, citing "difficult macroeconomic conditions in key markets."
Bvlgari's growth has trailed rivals including Cartier maker Cie. Financiere Richemont SA that expanded earlier in fast-growing developing economies, such as China.
"Things in the world have only gotten worse since we issued our guidance, so we wanted to be more prudent," Trapani said in a telephone interview last week. "We are focused on growing in markets that are brilliant, such as China, Hong Kong, Taiwan, South Korea, Russia and the Middle East."
In March, Bvlgari forecast profit and sales growth between 8 and 12 per cent excluding currencies. Italy is "suffering the most," Trapani said.
Sales of watches also fell 11 per cent in the quarter because of production problems following the late delivery of components, Trapani said.
Second-quarter sales rose 4.8 per cent to 274.7 million euros, above the survey's 271.4 million-euro median estimate. Still, Bvlgari said sales fell 21 per cent in the Americas and 4.5 per cent in its home market in the second quarter. Retail sales in Italy have been declining for 17 straight months.
The jeweller opened stores in Hong Kong, Shanghai and Macau in the first six months to benefit from demand for luxury goods in the region, which has propelled growth for rivals.
Richemont reported first-quarter sales growth that beat analysts' estimates on July 16 after China displaced the US as the main market for Piaget watches and Cartier necklaces.
Bvlgari got about 30 per cent of its sales between the US and Italy last year. It gets 33 per cent from emerging markets in Asia, eastern Europe and the Middle East, according to estimates from Sanford C. Bernstein analyst Luca Solca.
That compares with about 44 per cent for Swatch Group AG, 39 per cent for LVMH Moet Hennessy Louis Vuitton SA, 39 per cent for Richemont and 38 per cent for Boucheron and Gucci owner PPR SA, Solca said.
"LVMH, Richemont and PPR have moved quickly to expand in emerging markets, and this is helping them even more than their luxury positioning due to subdued demand in mature markets," Solca said in an e-mailed note.
"Bvlgari is moving in that direction, but still needs to catch up."
Bvlgari reported after the close of Milan stock trading on Friday. The shares fell 13 cents, or 1.8 per cent, to 6.91 euros, bringing the drop in 2008 to 28 per cent, exceeding the Bloomberg European Fashion Index's 20 per cent loss.
Sales in Asia rose 9.8 per cent. Revenue in Japan picked up from the first quarter, with a 6.7 per cent gain, after the company opened two flagship stores in Tokyo at the end of last year. Sales in the Middle East rose 11 per cent.
Perfume led Bvlgari's revenue growth in the period, with an increase of 26 per cent, thanks to the introduction of Aqua Marine and Jasmine Noir. That was followed by jewellry with a 5.2 per cent gain.
Richemont, the world's largest jewellery maker, sells luxury goods in more than 230 stores in China. The company also has a network of 30 stores across Russia and former Soviet Union countries to sell its products.
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