Bulgari Profits Fall 45 Percent in 2008

Bulgari flagship in RomeProfits for Bulgari SpA, one of the world’s largest luxury jewelers and watchmakers, fell 45 percent to 82.9 million euros (about $106 million) in 2008, according to its annual report released Mar. 11.

The tumble came primarily in watches, the Americas and Japan, and “significant” losses in currency exchange-rate hedging, including an unexpected appreciation of the U.S. dollar and Japanese yen against the euro since October.

Turnover for the full year 2008 reached 1.07 billion euros (almost $1.4 billion), less than 1 percent over 2007.

“Due to the worsened macro-economic conditions, which became very difficult in the fourth quarter of the year,” said the report.

Sales for all Bulgari product categories decreased, except perfumes. Watches had the biggest decline, falling 10.9 percent. Accessories were down 4.1 percent, while jewelry fell 1.5 percent. Perfumes increased 13.9 percent.

In terms of geographical areas, sales in the Americas fell 6.7 percent. Europe decreased by 1.4 percent. Japan declined 8.5 percent, while the rest of Asia grew 8.4 percent. The Middle East and other areas rose 9.1 percent.

Although Bulgari in 2008 took a “more cautious attitude on investing and spending [to] face the progressive worsening of the economic conditions,” said Francesco Trapani, Bulgari’s chief executive officer, “the drastic and sudden sales shortage in [2008’s] last quarter, as a consequence of the financial crisis and collapse of the worldwide stock exchanges, very negatively affected the full year results.”

Trapani said 2009 will be “a very difficult year as well” and—while there will be new launches in all product categories—Bulgari will focus on “managing the cost base even more rigorously to make the Group more and more efficient.” There will also be “more attentive control of the inventory to make it cash neutral and a further reduction of the investments.”

Financial press reports quoted Trapani saying the company this year will probably cut jobs, reduce inventory and some collections, and close some of its stores (263 worldwide, 164 were directly-owned).