Benetton profit drops by third as raw material costs bite

MILAN - Italian fashion label Benetton said Monday high wool and cotton prices have hit its profits badly and warned that high raw material costs would hit future earnings.

Net profit in the July to September dropped 33.6 percent to 31 million euros ($42 million) from the same quarter last year, while sales slipped 5.2 percent to 575 million euros.

Over the first nine months of the year, net profit fell 29.8 percent to 60 million euros, while sales were off 1.1 percent, Benetton said in a statement.

Sales dropped in Europe, United States and Japan, but saw double-digit gains in emerging markets, with 26 percent of sales now in developing countries.

The rise in wool and cotton costs hit earnings, however, and while prices have fallen from their highs, they will continue to weigh on earnings, the company said.

"In the light of an increasingly difficult economic scenario, the results achieved testify to Group efforts to achieve medium-term improvement objectives," said co-chief executive Biagio Chiarolanza.

"Operating profit for 2011 will be in line with forecasts, lower than in the last financial year" in which it racked up 176 million euros, he added.