UPDATE 2-Bang & Olufsen drops growth target after big profit miss
* 2012/13 revenue, EBIT margin forecasts cut
* Announces plans to close 125 stores
* Says turnaround will take longer
* Shares drop as much as 13 percent (Adds CEO, investor comments)
By Shida Chayesteh and Mia Shanley
COPENHAGEN, Jan 9 (Reuters) - Danish luxury stereo and television maker Bang & Olufsen (B&O) cut its outlook for the year and said it will close up to 125 stores mainly in Europe due to weak sales in the region.
Pretax profit in Bang & Olufsen's September to November quarter was 23 million Danish crowns ($4.03 million), well below an average 65.5 million crown forecast in a Reuters poll of analysts and down from 40.8 million crowns the previous year, sending the shares down as much as 13 percent.
The luxury goods sector has been struggling with Europe's long-running debt crisis in recent quarters though strong demand from emerging markets has offset some of the pain.
B&O though, has also been hit by a revamp of its distribution network in Brazil and China, two of its most promising markets.
"Now we are going in and taking over all the stores ourselves in China, so we are really doing as much as we can," Chief Executive Tue Mantoni told Reuters. "The short-term negative impact is the result of all that we are doing."
Having previously said it expected double-digit sales growth in its 2012/13 year, on Wednesday the firm said it expected revenue to exceed the 3.0 billion crowns it made in the previous year, without giving further detail.
"We would have liked to see higher sales in Europe," Mantoni told analysts on a call.
B&O shares were down 9.8 percent at 64.50 crowns at 1154 GMT compared with a marginal fall in the local mid-cap index .
"It's disappointing. It was in this quarter we should have started to see that they really were back on the growth track with the double-digit (revenue) growth, and it is far from that at 5.5 percent," said Soren Lontoft Hansen, analyst at Sydbank.
Reuters data shows that B&O stock trades on a forward 12-month price-to-earnings ratio of 27, more than twice a sector average of 13 for consumer electronic peers in Europe.
The company's biggest investor, Delta Lloyd Asset Management, said the market environment was tough but that it remained convinced Mantoni, who took the reins in 2011, could turn the company around.
"It is not a dead brand," Angus Steel, senior portfolio manager at Delta told Reuters, pointing to healthy growth in demand for sound systems for the automotive sector.
"In the medium term context, margins should stabilise at a high level... Growth markets such as the U.S. are very underestimated. It is not just about China," Steel said.
Delta has a roughly 15 percent stake in the company.
B&O expects its EBIT margin to remain positive compared to its previous forecast of an improvement over 2011/12's operating margin of 4.1 percent.
It expects its turnaround plan would now one year longer than originally anticipated.
($1 = 5.7097 Danish crowns) (Additional reporting by Simon Johnson; Editing by Elaine Hardcastle)
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