Gucci owner PPR’s profits soar
Shares in PPR soared to a 12-year high yesterday after the French luxury and sports brand group posted forecast-beating annual profits with an upbeat trading update and underlined its commitment to overhaul struggling sports brand Puma.
PPR which owns fashion labels Gucci and Bottega Veneta, said it wished to continue expanding in the luxury and sports sectors but would only look into making acquisitions in the outdoor gear sector once Puma was out ofthe woods.
“Once Puma is back on the path of growth, then we will look at growth opportunities in the outdoor sector,” PPR Group managing director Jean-Francois Palus said at the annual results presentation in Paris.
PPR said it was determined to improve the market position and organisational structure of Puma, which saw its profits slump 70 per cent last year and is going through its biggest reorganisation in 20 years.
Asked how long it would take to reverse Puma’s fortunes, Palus said: “It is not a question of patience but of will.
“We are determined to turn round this company.”
The group’s operating profit reached €1.76 billion in 2012, beating a Thomson Reuters estimate of €1.70 billion as resilient growth of its fashion and luxury labels helped make up for lower profitability at Puma.
PPR – which stands for Pinault, Printemps, La Redoute – has seen its valuation hurt by uncertainty about Puma, and about how long it will take PPR to exit the retail sector, which is generating much lower growth than luxury and sports brands.
PPR, which used to own department store Printemps and retailer Conforama, is still trading at a discount to its luxury peers, or about 14 times next year’s earnings against the European sector’s average of 15.5 times.
Palus said he expected to complete the sale of mail order business La Redoute this year, concluding the disposal process of the group’s Redcats division.
Having failed to find a buyer for books and CD retailer Fnac, PPR will spin it off via a share distribution to existing shareholders once the transaction is approved at the group’s annual general meeting in June.
The Redcats disposal and offloading of Fnac allowed PPR to recognise them as discontinued operations and avoid including in its accounts the units’ combined net loss of €276 million.
The outcome included restructuring charges of €149 million and €288 million in impairment charges on which PPR management did not comment.
PPR’s luxury division saw its revenue rise 14 per cent in the fourth quarter, with Gucci, the world’s second-largest luxury brand behind Louis Vuitton, up 8.2 per cent in comparable terms and Bottega Veneta up 32.7 per cent.
“PPR’s luxury division is enjoying one of the best sales growth and margin momentum amongst luxury players,” HSBC said in a note.
Comparatively, like-for-like revenues from fashion and leather goods at LVMH, which include brands such as Celine and Kenzo but are dominated in size by Louis Vuitton, only rose five per cent in the fourth quarter.
Meanwhile, during the same period and on the same basis, sales from Ferragamo rose 11 per cent, from Burberry nine per cent and from Tod’s group seven per cent.