Versace Posts ’03 Loss As Young Allegra Beck Begins Learning Curve

Ballestrazzi said that a swing in the exchange rate affected sales. In addition, last year saw a reduction in contributions from nonrecurring revenues, such as the eyewear licensing agreement inked with Luxottica in 2002 which injected 25 million euros, or $30.7 million, into the company. “On a pro-forma basis, had we maintained the same average exchange of 2002, sales would have declined by 7 percent, rather than 12 percent,” he said. The gross margin dropped to 203 million euros, or $249.9 million, from 270 million euros, or $332.3 million, in 2002.

In the second half of 2003, the company reduced ordinary costs, ranging from promoting and advertising activities to external consulting, by 12 percent to 202 million euros, or $248.6 million, compared with 230 million euros, or $283.1 million, the previous year.

Cost cutting helped EBITDA be in line with the 39.8 million euros, or $48.9 million, in 2002, while operating results, after amortization and devaluation, dropped to a loss of 21 million euros, or $25.8 million, in 2003 compared with a profit of 13.4 million euros, or $16.6 million, in 2002. Reducing inventories and receivables, said Ballestrazzi, helped improve the company’s net financial debt, which stood at 117 million euros, or $144 million, at the end of 2003, down from 130 million euros, or $160 million, at the end of 2002.

Ballestrazzi said there were “no major changes in market shares” in 2003 compared with 2002. Italy and Europe account for about 60 percent of sales, the U.S. for 14 percent, the Far East, excluding Japan for 8 percent. Japan accounts for 4 percent of sales.

“Japan has the most potential, we are recovering share and strength there,” said Ballestrazzi.

Versace saw a 70 percent drop in sales in Asia, including Japan, in the first half of 2003, hit by the impact of SARS. “The Japanese market is driven by accessories, and we are still very strong in apparel, so we are working on the product, focusing on being competitive there and growing our accessories division in that market, which is very traditional.”

Ballestrazzi said the company has “been effective in delivering its accessories concept in Europe with a strong repositioning,” but that work still needs to be done in Japan. Accessories globally account for 8 percent of the company’s business. “It’s a division that is below what it should be,” he said.