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Gucci warns on earnings
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June 19, 2001: 5:00 a.m. ET
Italian luxury goods group's profits miss forecasts, issues 2001 warning
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LONDON (CNN) - Luxury goods maker Gucci posted lower-than-expected first-quarter profits and warned 2001 sales and earnings will miss targets.
The Italian maker of items such as handbags, shoes, watches and high fashion said its revenue was hit by losses at its Yves Saint Laurent designer wear maker and by the U.S. slowdown that reined in sales.
Gucci said first-quarter net profits to April 30 rose 20 percent to $55.9 million from $46.6 million in the same period a year ago, as revenues edged up 5.5 percent to $559.7 million from $530.7 million.
Analysts had expected profits to rise about 40 percent. Shares in Gucci fell more than 11 percent to  90 in early Amsterdam trade.
The company also warned that both annual sales and operating profit would fall short of previous forecasts because of higher costs of turning around Yves Saint Laurent.
Losses at Yves Saint Laurent, which it bought in November 1999, are expected to rise to $75 million from a previously forecast $50 million, Gucci (GUC: Research, Estimates) said.
"The process of relaunching Yves Saint Laurent has caused us to expect to sustain a greater loss than we previously forecast," said Chief Executive Domenico De Sole. "This loss reflects the need to make investments in product design and development of the directly operated store network."
Gucci said sales were hit by slow purchases by U.S. department stores due to tight inventory controls across the Atlantic.
Gucci, which competes against companies such as France's LVMH Moet Hennessy Louis Vuitton [FR:PMC] and Switzerland's Richemont, also said its full-year 2001 revenues would be lower at $2.45 billion compared to its previous forecast of $2.60 billion.
Full-year operating profit before goodwill and trademark amortisation will be about $410 million, down from the previous $440 million forecast.
Gucci said its full-year diluted earnings per share would be $3.00, down from the earlier forecast $3.40, primarily due to lower U.S. dollar interest rates.
"In terms of the full year, the cut is not as bad as it looks at first sight as it is being driven by lower interest income," Morgan Stanley analyst Claire Kent told Reuters. 
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