UPDATE 2-Benetton says market still tough as Q1 net down

* Q1 net profit down 38 percent

* Delay in initial seasonal deliveries seen

* Weather, Italy earthquake, swine flu scare add to gloom (Adds details from conference call, updates shares)

By Marie-Louise Gumuchian

MILAN, May 11 (Reuters) - Italian clothing retailer Benetton (BNG.MI) said market conditions were expected to remain difficult as consumers continued to spend cautiously, after reporting a nearly 38 percent fall in first-quarter net profit.

"We have no clear sign of any change in the downward trend in the markets. Customers remain very cautious and postpone all non-essential purchases," Chief Financial Officer Alberto Nathansohn said on a conference call to analysts on Monday.

The company said that in its main market of Italy, unfavourable weather in the last few weeks and the deadly earthquake in the centre of the country last month as well as the swine flu scare had "added to the gloom".

"All in all, market conditions remain difficult and visibility remains a problem for the future," Nathansohn said.

Benetton, known for its colourful sweaters, said in a statement that first-quarter net profit was 18 million euros ($24.49 million), down from 29 million euros a year ago.

Net revenue fell 3.4 percent to 449 million euros. It fell 2 percent at constant exchange rates.

Benetton said unfavourable exchange rate trends in emerging markets also weighed. Sales in established markets fell 2.7 percent at constant exchange rates, and emerging markets rose 2 percent at constant exchange rates.

The company, which had previously announced a reorganisation, said it was changing its sourcing, production and shipment schedule for the 2009 fall/winter collection, "delaying the initial seasonal deliveries by a month, and, therefore, out of the second quarter".

"This will have a temporary impact on sales in the second quarter ... over and above normal market trends, which will be fully recovered in the third quarter of the year," Benetton said.

It said the change would improve the management of logistic costs. CFO Nathansohn added that the shifted sales amount concerned was between 80 million and 100 million euros.

In a slide presentation posted on its website, Benetton said orders for its 2009 spring/summer collection were up 1 percent, while for the autumn/winter line, backlog orders were flat and there was a slight slowdown in orders being taken.

Nathansohn said the company had about 50 to 60 percent of the orders it had expected to get. He said Benetton was not considering any significant price changes at the moment.