Clarins issues a shock warning

CLARINS, one of France's biggest beauty products groups, today shocked the market with a profits warning that suggested the luxury goods market is far from the road to recovery.

Clarins, which produces upmarket make-up and specialises in cellulite-busting body lotions, said that it expected operating profits in the first half to fall back by 40%. It blamed the setback on modest sales growth around the world for its Azzaro perfume and Thierry Mugler couture label.

Although first-half sales were up by 2.8% to e442m(£277m), the operating margin is likely to be much lower than that achieved in 2001.

Trading in Clarins' shares, which closed at e45 last night, was halted limit down, by 20%, on the Paris Bourse today. UBS Warburg lowered its ratings on the group to reduce from hold and slashed its target price from e54 to e38. UBS Warburg analyst Susanne Seibel said that she expected Clarins' sales growth would be no more than 3%.

In a report published today she writes: 'Although the share price was already down, we believe there is more immediate downside potential to current valuation and therefore rate the stock reduce.'