Benetton Says Economic Outlook in Main Markets ‘Critical’

Benetton Group SpA (BEN), Italy’s largest clothing company, said the economic outlook in its main markets remains “critical” and that it expects higher raw-material costs to hurt margins in coming quarters.

Third-quarter net income fell 33 percent to 31 million euros ($42.3 million) from 46 million euros a year earlier, Ponzano, Italy-based Benetton said in a statement today. Sales slipped 5.1 percent to 575 million euros.

Benetton is seeking to expand in faster growing emerging markets to help overcome a slowdown in Europe, where it generates about 80 percent of sales. Operating profit for the year will be lower than the last financial year, co-Chief Executive Officer Biagio Chiarolanza said in the statement.

“The economic outlook in the group’s main reference markets continues to be very critical, whereas the development of new markets continues in an encouraging way,” Benetton said. Emerging-market growth was led by Mexico, India and Russia.

The shares fell as much as 2.3 percent to 3.80 euros, and traded at 3.86 euros as of 2:48 p.m. local time. They have fallen almost 22 percent this year, giving the company a market value of about 703 million euros.

Benetton may report operating profit of 146 million euros this year, according to the average of five analyst estimates compiled by Bloomberg, down from 208 million euros in 2010.

Raw-material costs are “well above” the historic average, though have eased in the past few months, the company said.

To contact the reporter on this story: Armorel Kenna in Milan at akenna@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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