MILAN — Benetton SpA saw net profit and sales growth in the first half of the year, but higher costs bit into margins at the company as it executed an incentive scheme to benefit its franchisee partners.
Net profits for the six months ended June 30 rose 1.9 percent to 64 million euros, or $78.7 million. Sales for the period advanced 6.7 percent to 898 million euros, or $1.1 billion. The company also issued a bullish full-year outlook, upgrading its profit and revenue targets.
Dollar figures have been converted from the euro at average exchange rates for the period to which they refer.
Luciano Benetton, the company’s chairman, said the firm is seeing strong growth in orders, which he attributed to the group’s extensive commercial network and consumers’ appreciation of the quality of Benetton products.
“I am extremely confident that this tendency is only the beginning and I’m expecting further growth in the future,” Benetton said in a statement.
Benetton said full-year sales are expected to grow about 8 percent, up from a previous forecast for 3.6 percent growth. Full-year net profits are expected to come in at 6.5 percent of revenue, which works out to 123.9 million euros, or $157.4 million.
Benetton’s first-half net profits grew but only thanks to a lower tax rate. Pretax profits slid 1.4 percent to 83 million euros, or $102.1 million.
Benetton’s gross industrial margin dropped to 42.3 percent from 43.8 percent in the first half of last year on rising costs, especially of material and subcontracted work.
The company’s margins suffered as Benetton continued with an incentive scheme aimed at rewarding its franchisees, a spokesman clarified. Last year, Benetton started selling its goods at lower wholesale prices so that franchisees could reap higher profit margins at their stores.
As for sales, Benetton said its new joint venture in Turkey contributed 14 million euros, or $17.2 million, in revenue in the first half of the year. Last year, Benetton inked a joint venture with its historic Turkish licensee, the Boyner Group, for the development and management of Benetton brands in Turkey and the immediate region.
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Benetton did not further break down sales by geographic region, but the company said that first-half sales growth was “particularly significant” in Mediterranean countries, Eastern Europe, China and India.