PPR profits up with demand for luxury goods

PPR, the French retail and luxury goods that owns Gucci and Balenciaga, said first-half profit surged 87 percent as demand for clothing and accessories in Asia grew. Profits advanced to 407 million euros ($531.8 million) from 217.9 million euros a year earlier,

PPR said in a statement. Net income more than doubled to 402.8 million euros after PPR spun off a unit. That beat the 327.5 million-euro average estimate of analysts surveyed by Bloomberg. The Group received “significant signs of interest” in the retail businesses that generate 63 per cent of group sales.

Mr Pinault said he expected interest would deepen in the businesses he plans to sell after the group reported an 87 per cent rise in first-half net profits. The rise was driven mainly by a rebound in the subsidiaries that are for sale – Fnac, the high street book and music retail chain, Conforama furniture stores and the Redcats catalogue group.

“There is no need to hurry,” he said. “Because of their excellent performance, I am not going to sell them off at a bargain price – we will sell when market conditions are right.”

Mr Pinault, chairman and chief executive, plans to focus PPR – the company founded by his father, François Pinault – on two core businesses. These are Gucci, the luxury clothing and leather goods maker, and a new “lifestyle” group centred around its majority stake in Puma, the German sportswear company.

Puma has outlined an ambitious five-year programme aimed at increasing sales from an expected €2.5bn ($3.3bn) in 2010 to €4bn in 2015, through organic growth and small bolt-on acquisitions.

Net income from continuing operations at PPR rose by 87 per cent to €407m in the six months to the end of June compared with the same period last year, on sales up 4 per cent at €8.1bn, as the fruits of last year’s cost-cutting translated into higher gross profit margins.

The result was higher than expected but the outperformance was not as great as that of LVMH, the world’s biggest luxury goods group which reported record sales last week.

Nevertheless, the results signal a revitalisation of the luxury goods business, which Mr Pinault said had been helped in France by the weaker euro and the return of US tourists.

Operating profit at Gucci Group – which accounts for 20 per cent of PPR sales but 50 per cent of operating profit – rose by 23 per cent to €375m, dominated by the Gucci brand and Bottega Veneta, the leather goods company.

The operating loss at Yves Saint Laurent halved to €6m and the performance of other brands improved, including Alexander McQueen, whose eponymous designer committed suicide in February.

Source: Financial Times
Image: Balenciaga AW10