PPR’s Q1 Beat Estimates on Luxury Brands’ Sales Increases

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Sales of Yves Saint Laurent's Cabas Chyc leathergoods have been particularly strong, PPR said in its first quarter report.

Paris—PPR, the luxurygoods group behind Gucci, Yves Saint Laurent and Puma, said today it is well on its way to increased sales and profits this year given its strong first quarter performance.

For the quarter ended March 31, PPR said today that sales increased 15% to 3.26 billion euros (about $4.3 billion) ahead of analysts’ average estimate for 3.26 billion euros in sales. Excluding acquisitions and currency fluctuations, the growth was 7.9%.

“Our Luxury Brands once again reported strong growth in all geographic areas, while our Sport & Lifestyle brands continued to move ahead,” said François-Henri Pinault, chairman/ceo. “These performances bear witness to the Group’s momentum, its successful multi-brand strategy, the remarkable geographic spread of its businesses and the strength of its business model. This reinforces our confidence in PPR’s ability to deliver another year of brisk revenue growth, combined with gains in operating and financial performance, in 2012.”

PPR’s first quarter strength could be attributed to the “fast-paced growth of the group’s businesses in emerging countries” which now represent around 37% of revenue for the Luxury and Sport & Lifestyle divisions.

That’s good news for PPR which has been trying to refocus its energies on its luxury brands and sport and lifestyle brands while shedding its Redcats retail operations (which is already excluded from PPR financial reports, and its Fnac home electronics chain, which accounted for about a third of the company’s sales last year.

PPR’s goal is to hit 24 billion euros in sales by 2020, with 10 billion euros coming from Asia.

Its luxury brand division saw an 18% increase in comparable sales to 1.46 billion euros, bolstered by a 12% increase from Gucci. Fashion and leathergoods sales advanced 18% during the quarter.

By brand, Gucci posted a 12% sales increase in comparable terms with its directly-operated stores now accounting for three-fourths of Gucci’s total sales. Online sales surged 30%, continuing to increase as a proportion of total revenue. All geographic areas reported growth, with Western Europe up 10% and North America up 9%, “demonstrating the brand’s unrivalled appeal in mature markets.” Japan continued to recover, posting a 16% increase in sales, while emerging markets continued to grow at a consistent pace, particularly Greater China which was up 15%. All Gucci product categories achieved major gains, most notably a 20% increase in timepieces.

North American Sales at Gucci, Bottega, YSL All Up

New Gucci Bamboo watch in honor of the 40th anniversary of Gucci Timepieces

At Bottega Veneta, sales jumped 33% on a comparable basis with strong performances across all geographic areas: Western Europe (up 28%), North America (up 36%), Asia-Pacific (up 45%) andJapan(up 16%).  Online sales more than doubled from first quarter 2011, the company said.

Yves Saint Laurent saw sales soar 40% on a comparable basis buoyed by sales increases across all regions: Western Europe (up 34%), North America (up 48%), Japan(up 53%) and Asia-Pacific (up 63%). Sales of leathergoods were particularly notable, the company said, “leaping on the strength of the new Cabas Chyc as well as carry-over lines such as Muse and Muse 2.” Footwear also performed well, thanks to the continued success of the Tribute, TribToo and Palais lines.

PPR’s other luxury brands, which include Alexander McQueen, Stella McCartney and Boucheron, posted comparable sales growth of 20% with all brands and regions contributing to the performance: Western Europe (up 12%), North America (up 33%), Asia-Pacific (up 30% of which China up 28%) and Japan (up 10%). Particularly strong momentum was seen in fashion and leathergoods, which grew more than 30% in the quarter, “driven by sparkling performances at both Alexander McQueen and Stella McCartney, together with another strong showing at Balenciaga.”

Brioni, which PPR completed its purchase of in January, also posted double-digit growth. Boucheron showed further improvement, driven by its retail business.

In comparison with its luxury brands, the Sport & Lifestyle division posted only a 3% sales increase on a comparable basis. Sales of accessories and apparel helped offset Puma’s weaker performance in mature markets. “Volcom reported a good performance with sales holding firm versus the same prior-year period, on top of a high basis of comparison.”

Puma also reported a 3% sales increase in comparable terms. “Performance in mature markets was disappointing, with sales in Western Europe down 4% and North America reporting 4% growth, both regions being held back by sluggish sales in the footwear category,” PPR noted.

Puma’s management is “focusing on adjusting its organization” to “kick start growth momentum,” the company said. “This includes capitalizing on the promising results of the eagerly-awaited Archive Bolt Lite footwear line by expanding its ultralight range.” Puma also plans to launch an all sports category ultralight footwear collection by Usain Bolt.

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