Gucci blames travel slowdown for halving profits

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The uncertain economic environment and slowdown in tourism has continued to hit luxury goods groups as shown by Gucci's first quarter results announced yesterday

The company saw pre-tax profit almost halve in the three months to April 30, falling to Eur35.6m ($33.9m).

In Europe, retail sales of the core Gucci brand were down 6.6%, primarily as a result of the decline in Japanese and American travel and tourism. The US saw retail sales drop 25.7%, also due to continued weak tourism traffic, especially in Hawaii.

Gucci said group turnover fell slightly to Eur607m ($578m) from Eur616.7m ($587m) in the same period of 2001. This was a bigger decline than expected by analysts. The total figure includes a 12% slip in core Gucci brand revenue to Eur371.2m ($353.5m). At Gucci, ready-to-wear was the category which saw the biggest sales drop followed by watches. Jewellery was the only segment to grow sales.

In a statement, chairman and ceo Domenico De Sole acknowledged the difficult operating conditions in the industry but stuck to previous targets of full-year sales of Eur2.7bn ($2.6bn) and a recovery in the Gucci brand operating margin to about 30%. "These are trying and uncertain times and consequently we have to be cautious about the rest of the year," said De Sole.