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Jul 29, 2011
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PPR H1 beats forecasts thanks to luxury brands

By
Reuters
Published
Jul 29, 2011

July 29 - French retail and luxury group PPR SA delivered first-half sales and profits above forecasts on Friday, helped by strong growth of its luxury brands in major markets such as China.

PPR
Gucci Fall-Winter Collection 2011-12, Show during Milan Fashion Week. - photo: corbis

PPR's luxury brands, which include Yves Saint Laurent, Alexander McQueen and Gucci, produced combined sales growth of 24.4 percent in the second quarter, above expectations of 19 percent and first-quarter luxury growth of 22 percent.

"We saw a sharp acceleration in luxury trends. This is an impressive performance ... one of the best in the sector," analysts at Citi said in a note.

Earlier this month, Hermes , the luxury sector's strongest brand which had best resisted the 2009 downturn, posted second-quarter sales growth of 22 percent on a comparable basis.

PPR Finance Director Jean-Francois Palus said good surprises in the figures included results from Yves Saint Laurent, whose revenue rose 34 percent in the second quarter on a like-for-like basis, driven by couture orders.

Progress was made in mainland China, where luxury revenue jumped 54 percent in the second quarter alone. In western Europe revenue rose 19 percent and in North Americas there was a 26 percent rise on a like-for-like basis.

LUXURY GROWTH

Total recurring operating income reached 749 million euros ($1.1 billion) on revenue of 7.22 billion euros for the six months to June 30.

PPR had on average been expected to produce an operating profit of 730 million euros on first-half sales of 7.12 billion according to a Reuters poll of 10 banks and brokerages.

Gucci, which generates the bulk of profits of PPR's luxury branch, generated recurring operating income of 439 million euros, up 33 percent on revenue 21 percent higher.

"The good news ... is clearly the growth of luxury sales, but Fnac is catastrophic," one Paris-based analyst said, referring to the chain which sells books, CDs and computers and which saw comparable sales drop 3.2 percent in the first half.

Fnac's recurring operating profit collapsed to 1 million euros from 38 million.

PPR executives will be asked later on Friday about progress regarding the disposal of its mail order business Redcats and its interest in acquiring Italian tailor Brioni among other potential targets.

The group, which is looking to sell all of its retail operations to focus on luxury and sports apparel, has recently acquired control of Swiss watchmaker Sowind, giving it brands Girard-Perregaux and JeanRichard. It has also completed the acquisition of U.S. sports brand Volcom.

(Editing by David Cowell and David Holmes)

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