Iraq war impedes Gucci progress

15 August 2003

Luxury goods group Gucci, which includes Yves Saint Laurent, Sergio Rossi and Bottega Veneta, made a pre-tax loss in the first quarter of almost US$13.77 million, compared with a pre-tax profit of US$30.6 million for the same period last year. Domenico De Sole, Gucci's chief executive, blamed the sharp fall on the war in Iraq, the outbreak of SARS in Asia and the recent strength of the euro. 'As a result, this quarter was the most difficult we have experienced', he said, referring to the period as a 'perfect storm'. However: 'The signs that we are getting, based on the months of May and June, are quite dramatically different from what we saw in the first quarter. I expect a significant improvement. The only areas that remain soft are Italy and France because tourism is not back.' At their core Gucci division, operating profits fell by 31% to US$55.8 million on sales down by almost 14% to US$275.3 million. Leathergoods and watches were particularly affected. Yves Saint Laurent, which Gucci bought for $1 billion in 1999, saw their operating loss increase from just under $17 million to nearly $18.5 million on slightly lower sales of $28.3 million. In February Gucci warned that YSL would not be profitable until 2005, a year later than expected. Bottega Veneta, Alexander McQueen and Stella McCartney all had good performances during the first quarter.

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