Gucci, the Italian luxury- goods group, warned yesterday that it would miss sales and profits forecasts this year because of the cost of revamping its Yves Saint Laurent fashion business.
Shares in Gucci, which is listed on the Amsterdam Stock Exchange, fell 5.35 per cent to 96.25 euros after the group admitted that YSL's full-year operating losses would be $75m (£53.4m), rather than the $50m (£30.5m) previously forecast.
Domenico De Sole, the chief executive of Gucci, said he did not expect YSL to become profitable until late 2003, instead of next year as previously hoped. Gucci bought the loss-making French designer in 1999 and remains convinced that the brand will match the profits of its core fashion and leather unit once the revamp is complete. Gucci is seeking to re-glamourise YSL, buying back third-party licences and limiting sales to exclusive boutiques.
YSL's poor performance prompted Gucci to cut its revenues forecasts for 2001 to $2.45bn from $2.6bn, and its estimates for operating profits to $410m from $440m. Simon Raggett, an analyst at Williams de Broe, said: "The jury is out. The signs are that [YSL] will come right, but it boils down to an act of faith." Tom Ford, Gucci's creative director, has helped lay the groundwork for the hoped-for turnaround, winning critical acclaim for his YSL autumn/winter collection 2001.
Gucci's profits warning sent shock waves across its sector. Shares in Pinault Printemps-Redoute, the French retailer that controls Gucci, and Bulgari, the Italian jeweller, ended down, while LVMH, the French luxury goods maker that also has a stake in Gucci, clawed back earlier losses to close up.
Business in Gucci's core luxury products division remained robust, with the group reporting a 20 per cent rise in net revenues for the first quarter of its financial year, to $55.8m from $46.6m. Turnover rose 11 per cent to $257.6m.