Benetton has reported Group net revenues for the first half of 2009 of €882 million (-11.4% down against H1 2008), impacted by a major change in the timing of shipments for the Fall/Winter collections, which saw a rescheduling of over €88 million of deliveries to the third quarter, to better match seasonality, provide improved service to clients and improve management of transport and logistics. The company said that the overall variation was also impacted by the deterioration in exchange rates (Korean won, Turkish lira, Indian rupee and the rouble among others) against the euro (-0.6%), and a worsening of mix, caused by the rescheduling of deliveries.

Textile segment sales increased by €3 million to €51 million, while apparel sales were €831 million, €117 million lower than H1/08. Of the latter, €132 million was attributable to the wholesale channel, in which the entire delivery rescheduling was concentrated, offset by growth of €15 million in direct sales, mostly resulting from the new openings.

Established markets, net of the effect of the rescheduling, which impacted the most on them, largely maintained their position; Italy, in particular, the Group’s main market, demonstrated receptiveness to the new commercial proposals.

Emerging markets grew by 5.8% at constant exchange rates. Benetton says the following individual markets are noteworthy: India, which recorded very good growth, driven by 95 new openings, and China, which reflected the first effects of the refocusing process with positive growth (on a like-for-like basis) in the second quarter of the year. Mexico benefited from the opening of 120 corners and 18 new stores in the first year of operations, with a positive result in spite of the disruptions caused by swine flu. Turkey confirmed the strength of its business, with repositioning and enlargement of some stores in prime commercial locations; the opening of a flagship store in Istanbul is expected in October. In Russia, finally, the start-up of the commercial trading activity has facilitated the introduction of new product segments and new network support services. There have been 9 openings in the country in the last twelve months. Total net openings in priority markets constitute around half of the over 350 additional stores opened worldwide in the last twelve months, the majority managed by third parties.

Gross operating profit, amounting to €401 million (45.5% of net revenues) was down in both absolute value (-€61 million) and percentage terms (-0.9%), largely due to the effect of the previously mentioned rescheduling of deliveries (-€38 million) and, to a lesser extent, due to the exchange impact (-€19 million), largely caused by the revaluation of the US Dollar against the Euro. Further negative effects were due to mix, while there was a positive impact of €24 million from both actions already planned and those included in the reorganization plan relating to sourcing and production efficiencies.

The contribution margin was €336 million (38.2% of revenues), down compared with €390 million in the corresponding period of 2008 (-€54 million and 39.1%), mainly due to lower commissions paid in respect of the reduction in revenues.

The incisive actions implemented at the beginning of 2009 to reduce general and administrative expenses have started to generate savings during H1/09, most evidently in the areas of cost of: temporary work, third party and consultancy services, advertising due to lower rates, notwithstanding the expected increase in depreciation and amortization, resulting from investments completed in the last financial year.

In addition, non-recurring items worsened by a total of €19 million (from a recorded one-time income of around €8 million, to a total expense of €11 million), including around €10 million of reorganization costs.

As a result, operating profit (EBIT) was €43 million (it would have been €74 million without the rescheduling of deliveries), down from €116 million in the corresponding period of 2008. Overall, the following significant items impacted on this result: on the positive side €12 million was generated by the reorganization plan already taken; on the negative side €31 million was due to the temporary delay in shipments, another €11 million resulted from the exchange rate trends (with a corresponding income from foreign currency hedging which will be commented on later), and finally €19 million due to higher non-recurring expenses.

Financial management highlights were: a significant reversal in the trend for foreign currency hedging, which produced €4 million of profit, partially compensating the negative impact of previously mentioned currencies on revenues and margin, compared with a loss of over €7 million in the corresponding period of 2008; and also a significant improvement in net financial expenses due to the effect of lower interest rates, more than offsetting an increase in the average position in the half year.

Net income, finally, was €29 million (3.2% of revenues), compared with €72 million (7.2%) in the corresponding period of 2008. Without the shipments rescheduling, it would have been €51 million.