PPR’s Half Year Report: “Very Satisfying”

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From Gucci’s Fall ad campaign

Paris—PPR, the luxurygoods group that owns Gucci, Bottega Veneta, etc., reported Thursday its first half profit rose as sales of luxurygoods continued to increase despite economic concerns.

The company said if first half profit was 476.9 million euros (about $586.7 million), ahead of analysts’ estimates for 473.2 million euros.

Total sales rose 17% on a proforma basis (excluding which its Redcats catalogue business and Fnac retail unit which are up for sale) to 6.39 billion euros, also beating expectations.

Noting the revenue increase and a 13% increase in its recurring operating margin, François-Henri Pinault, chairman/ceo, said: “Together, the Luxury and Sport & Lifestyle Divisions recorded a combined revenue increase of more than 25% on a reported basis, propelled by the sales momentum of all our luxury brands across all regions. The pace of growth in the Sport & Lifestyle Division picked up in the second quarter, and its profitability should be enhanced once the implementation of Puma’s Transformation Program has been stepped up.”

Much like rival LVMH, PPR has been expanding into emerging markets where high growth may offset any softness in mature markets such as Europe or the United States.

For instance, sales in its Luxury and Sport & Lifestyle brands advanced 16.6% on a comparable basis in these markets, which accounted for 37.8% of the brands’ first half sales total. The Asia-Pacific region (excluding Japan) was one of the main contributors to these brands’ sales, representing 25.4% of the total, up 16.2% on a comparable basis versus the first half of 2011.

2012 Sales to  Outstrip 2011?

At the Luxury division, home to the company’s cornerstone Gucci brand as well as Bottega Veneta and Balenciaga, sales increased 18% on a comparable basis–excluding currency effects and asset sales—maintaining a strong pace in the first quarter, (up 18%) and second, (up 17%).

The Sports & Lifestyle division, which includes Puma, posted a weaker performance, with sales up 4% to 1.69 billion euros. Earlier this month, Puma said its profit outlook would be lower than expected and plans additional cost cutting to help margins.

PPR reportedly is looking to acquire a Chinese brand “with its own identity” that doesn’t follow the European concept of luxury goods, as Pinault explained last year.

Much like his arch rival at Bernard Arnault at LVMH, Pinault is positive about the second half even as some luxury brands warn of slowing sales.

“We are confident that we will be able to continue growing our revenue in the second half of 2012 and that our full-year financial performance will outstrip that of 2011,” said Pinault.

“In a world where companies are struggling with diving European demand and media are awash with bad news, luxurygoods companies like LVMH and PPR seem to be coming from another planet,” said Luca Solca, global equities analysts head at CA Cheuvreux. “The revenue and profit performance of PPR and LVMH are very satisfying.”




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