Paris—Reporting that its 2011 profits rose 2.3% as it transitioned out of lower end retail, PPR, parent to Gucci, Bottega Veneta etc., said today that it expects better earnings this year despite “an uncertain economic climate.”
For the year ended Dec. 31, PPR post net income of 986.3 million euros (about $1.29 billion) from 964.5 billion euros in 2010. Excluding non-recurring items, full-year net income from continuing operations reached 1.05 billion euros, or 8.35 euros a share, versus 834.5 million euros, or 6.59 euros a share in 2010.
Revenue for the full year increased to 12.23 billion euros from 11.0 billion euros in the comparable period a year ago.
Over the last year, PPR has been reorganizing to focus on luxurygoods and sports lifestyle brands, planning to sell off its Redcats online business and Fnac, an Italian electronics chain, where operating profits dropped 47%.
Goal: 24 Billion Euros by 2020
To beef up its luxury and sports brands, PPR purchased Sowind Group, a high end watch company, Brioni, the menswear brand, and Volcom, a better athletic lifestyle brand. And the company said additional “medium sized” acquisitions would be likely.
For the year, its luxury group, which includes Gucci, Bottega Veneta, Yves Saint Laurent, posted a 22.2% increase in sales, while the sport and lifestyle division, which includes Puma and Volcom, had a 10.5% increase.
“The transformation of PPR into a more cohesive, integrated group will make us stronger and enable us to fully exploit the huge growth potential of each of our brands,” said François-Henri Pinault, chairmand/ceo.
Operating income from the luxury division rose 33.8% to 1.26 billion euros, including a 335.1% increase at Yves Saint Laurent where YSL Couture became profitable for the first time. Revenue at Gucci, its biggest brand, was up 18.7% to 3.14 billion euros with an operating profit up 25.2%. However, fourth quarter sales at Gucci, which were up 12% missed analysts’ average estimate for a 15% increase. Bottega Veneta saw a 33.3% increase in 2011 sales to 682 million euros, and a 57.1% jump in its operating profit.
PPR said the Asia-Pacific region, excluding Japan, was one of the main contributors to these brands’ sales during the year, representing about 24.3% of the total. The company plans to open 43 Gucci stores this year, Bottega will open 22 and Yves Saint Laurent will open 15.
For the long term, PPR hopes to achieve 24 billion euros in sales by 2020, with 10 billion euros coming from Asia and more than 1 billion euros online. With 54% of revenue coming from retail and 40% from sports and lifestyle, the company said in a presentation to analysts.
In other announcements, the company named some key positions to its executive committee: Patrizio di Marco, chief executive of Gucci, Marco Bizzarri, ceo at Bottega Veneta and Franz Koch, ceo of Puma.
Seeing Red: Battle with Louboutin
PPR also said that Jean-Marc Duplaix, who recently joined PPR as group chief financial officer, will also join the executive committee.
During a press conference following the 2011 results, Pinault fired off against footwear designer Christian Louboutin, who evidently referred to PPR as counterfeiters in an interview with French newspaper Libération.
Responding to Louboutin’s accusations that PPR was a counterfeiter in regard to the company’s trademark battle over red-soled shoes, Pinault told reporters: “We won the first proceedings in quite precise, clear terms. I am therefore very confident with regard to this case, even if I regret it, because these are two great houses and I think we have better things to do than to fight in court over a question of color.”
Louboutin, who registered the red sole as his trademark with the U.S. Patent and Trademark Office in 2008, sued YSL claiming in April that red soled shoes from its resort collection was “virtually identical” to Louboutin’s. The court decision is pending over the matter.
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