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War makes Gucci wary
AMSTERDAM, The Netherlands (Reuters) -- The third biggest luxury goods maker Gucci Group NV posted a less-than-expected fall in 2002 net profit of 27 percent on Thursday and said it remained wary about the near term due to a weak economy and the Iraq war. "We are cautious about the spring period as we continue to see an uncertain environment with persistent volatility across the global markets worsened by the onset of war,'' Chief Executive Domenico De Sole said in a statement. Gucci's net profit for the fiscal year ending on January 31 declined to 226.8 million euros from 312.5 million in 2001, better than a consensus forecast by analysts polled by Reuters of 213.4 million euros. Diluted earnings per share (EPS) for 2002 fell 28 percent to 2.21 euros versus an analysts' forecast of 2.08 euros. Investors had been expecting weak figures after Gucci, also home to British designer Alexander McQueen, issued a profit warning in December due to a downturn in sales ahead of the key Christmas season. At the time, it said diluted EPS would be a minimum of 2.00 euros. Luxury firms have been suffering from global economic weakness and uncertainty ahead of the war in Iraq, expected to cause high-spending tourists to curtail travel plans. Sales in the Gucci division, famed for handcrafted handbags and loafers, fell by 9.6 percent to 1.54 billion euros, much worse than the 0.8 percent loss to 2.54 billion in group sales. Analysts say the unit, which accounts for the bulk of group turnover, has lost sales to rivals such as LVMH's Louis Vuitton. In the fourth quarter, however, the division achieved a record high operating margin of 34.7 percent. Gucci also said it had bought back 250,595 of its shares in the fourth quarter for 21.6 million euros and between February 1 and March 25 purchased 1.89 million more for 165 million euros. French retailer Pinault Printemps Redoute SA owns a majority stake of more than 60 percent in Gucci and has the right to increase the stake to 70 percent until 2004. Gucci shares have held up better than most peers since PPR said it will bid for the remaining shares at $101.50 per share in 2004, functioning as a put option. The shares have gained two percent this year, outperforming the DJ Stoxx European cyclical goods index by about eight percent. They closed at 89.40 euros on Wednesday. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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