DALLAS, Jul 2, 2003/ FW/ -- Gucci Group reported today that revenues for its fiscal first quarter was € 567.1 million, a drop of 6.7% against expectations of € 567.1 million. Operating income before goodwill and trademark amortization was € 5.8 million, a drop of 89% from analyst expectations of € 51.1 million.

Hardest hit was the Gucci division which saw a drop of 13.7% to € 320.4 million, Operating income before goodwill amortization was € 64.8 million (20.2% margin) compared to 25% last year.

Yves Saint Laurent posted revenues of € 32.9 million, up 4.3% in constant currency. In May and June, retail sales returned to double-digit growth in constant currency.

YSL Beauté, the division which handles the cosmetics and fragrances division of the group eked out a 2.4% increase in revenues in constant courrencey, posting € 140.9 million, up 2.4% in constant currency.

Bottega Veneta, Alexander McQueen and Stella McCartney gave stellar performances, but it was not enough to bring the company out of the hole.

Bottega Veneta revenues increased 63% in constant currency. Alexander McQueen and Stella McCartney each had triple digit sales growth.

Hinting that the war in Iraq and the outbreak of SARS in Asia were the main culprits for the substandard performance of the Gucci Group, Domenico De Sole commented, "The luxury goods industry faced a uniquely challenging environment during the first quarter. The situation was exacerbated by the strong revaluation of the Euro, which cut tourism and tourists' purchasing power in Europe."

Confirming the resulting sharp decline in travel and confidence led to reduced traffic and in turn sales, De Sole said the company accepted and met the challenge by reducing costs agressively.

Showing his optimism for the future, De Sole concluded, "e have developed and are already delivering very strong collections for the Fall/Winter season. In particular, Gucci's Fall/Winter leather goods collection is superb and has driven a significant shift in the trend of retail sales as it has begun to reach our stores in the second half of June."

The group's other brands performed well though. Yves Saint Laurent rebounded, with double digit growth in May and June. Bottega Veneta, which continues to grow rapidly, with revenues up 63% in constant currency.

The group also experienced double-digit retail sales growth in Asia.