Italy's Gucci fails to hit mark

Gucci: Big spenders stay away

AMSTERDAM, the Netherlands (CNN) -- Italian luxury goods company Gucci Group posted a worse-than-expected fall in first quarter profit as a faltering global economy crimps spending.

The world's third-largest luxury goods group said on Wednesday net income fell 42 percent to 35.5 million euros ($34 million), or 0.35 cents per share, in the quarter ended April 30. Sales fell 1.5 percent to 607.6 million euros.

Analysts polled by Reuters had expected on average a profit of 43.8 million euros.

Gucci, joins its biggest rivals LVMH Moet Hennessy Louis Vuitton and Switzerland's Richemont, in blaming poor economic conditions in the U.S. and the September 11 attacks for a drop in demand. All three are highly dependent on tourists splashing out on lavish purchases while on holiday, but air travel has declined following the attacks.

"The trading environment in the first quarter was characterised by depressed levels of international travel and tourism, and weak consumer spending in the U.S. and Europe,'' Chief Executive Domenico de Sole said in the statement.

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Gucci, which owns the Yves Saint Laurent, Sergio Rossi, Alexander McQueen and Stella McCartney brands, reiterated its outlook for 2002, saying diluted earnings per share would fall to 2.60 euros-3.00 euros and sales would rise slightly to 2.7 billion euros ($2.38 billion) from $2.285 billion in 2002.

"These are trying and uncertain times and consequently we have to be cautious about the rest of the year,'' De Sole said.

The company also said an operating loss before items of 19.7 million euros at its Yves Saint Laurent fashion unit, which it bought in 1999 for $1 billion, and lower interest on its cash pile, also hurt profits.

Gucci shares, which closed in Amsterdam at 100.39 euros on Tuesday, have gained around four percent so far this year, despite weak profits because majority owner French retailer Pinault Printempts Redoute has made an offer to buy all Gucci shares at $101.50 in 2004.