Strong Gucci Sales Help Boost PPR

Luxury goods lifted first-quarter sales at PPR, the French conglomerate that owns Gucci Group, as the firm's less profitable retail operations continued to post more tepid growth.

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PARIS — Luxury goods lifted first-quarter sales at PPR, the French conglomerate that owns Gucci Group, as the firm’s less profitable retail operations continued to post more tepid growth.

Sales in the three months through March 31 advanced 5 percent, to 4.45 billion euros, or $5.88 billion, led by a 10.7 percent gain in sales at the Gucci Group luxury division and beating most analysts’ consensus expectations, PPR reported Thursday.

Adverse currency exchange conditions and soft sales in Japan were the main blights on the performance, reflecting similar trends from key luxury players LVMH Moët Hennessy Louis Vuitton and Compagnie Financière Richemont.

Both of those factors weighed significantly on Gucci as the brand’s sales advanced 4.4 percent, to 530.5 million euros, or $701.8 million, instead of the 10.2 percent sales would have grown at comparable exchange values. Currency conversions were made at average exchange rates for the period.

Gucci’s high-margin leath­er goods category was affected the most by the still weak Japanese market, Jean-François Palus, PPR’s chief financial officer, said on a conference call. Overall sales of Gucci leather goods slipped 0.9 percent in the quarter, with Japan presenting the most difficulty. At comparable exchange, leather goods sales gained 5.3 percent.

“Japan is a tough environment,” said Palus, adding Gucci was working to turn around its performance in the island nation by trading up assortments, creating products exclusive to the market and pumping more excitement into the shopping experience.

Gucci’s ready-to-wear and shoes were more robust and both posted 24 percent gains. Timepieces also showed signs of improvement.

Palus said the reception at the recent Basel fair of the new women’s Signoria and men’s Pantheon watches was “positive” and that the category posted high single-digit growth in the first quarter.

Outside Japan, Gucci’s overall sales grew 10 percent in Europe, 18 percent in North America and 10 percent in Asia, including 85 percent growth in China, reflecting a more propitious luxury market outside Japan.

Gucci opened one store in the quarter, in the Chinese city of Shenzen, bringing its total count to 220 units. Six more stores are planned in the rest of the year, mostly in Asia.

This story first appeared in the April 27, 2007 issue of WWD.  Subscribe Today.

Bottega Veneta, quickly becoming a star for PPR, said sales gained 45 percent, to 84.8 million euros, or $112.2 million, as it opened new stores and logged growth in all product categories. Sales of leather goods at Bottega leapt 55 percent, while rtw and shoes advanced 56 percent.

Bottega, whose sales rose 57 percent in Japan, fared better in that country than Gucci due to its “very exclusive” positioning and products that “target high-wealth customers” who are less “price-sensitive,” said Palus. The brand recently opened its largest store in the world in Tokyo’s Ginza district.

Bottega’s sales rocketed 77 percent in Europe, 33 percent in North America and 43 percent in the rest of Asia. Overall, the brand opened four stores in the quarter, bringing its total network to 101 units.

Yves Saint Laurent continued to show signs of improvement as sales rose 30.2 percent, to 55.2 million euros, or $73 million. Palus said the brand’s momentum had brought its breakeven target “nearer,” but he declined to give a date for the house to edge into the black.

He reiterated YSL would emerge from the red with annual sales of about 300 million euros.

Both retail and wholesale sales logged robust gains at YSL, 18 percent and 97 percent, respectively, marked by a “growing” contribution by leather goods. Sales grew 38 percent in Europe, 47 percent in North America and 49 percent in Asia, excluding Japan, where YSL sales improved 10 percent.

YSL Beauté’s sales gained 7.4 percent, to 152.3 million euros, or $201.5 million, on the back of good performances from YSL-branded products and Stella McCartney fragrances, and good business in Europe and Asia. Palus said trading in the U.S. and Japan remained “challenging.”

The group’s other brands — Balenciaga, Boucheron, Sergio Rossi, Alexander McQueen, Stella McCartney and Bedat & Co. — logged 22.4 percent growth, to 114 million euros, or $150.8 million. Palus singled out double-digit gains at Balenciaga, Boucheron, McCartney and McQueen.

PPR’s lower-margin retail operations were less stellar, especially the Redcats mail order division, where sales fell 1.9 percent, to 1.05 billion euros, or $1.39 billion, dented by strong competition.

Sales at the Fnac music and book chain gained 5.1 percent, to 1.07 billion euros, or $1.41 billion, and sales at the Conforama furniture retailer grew 6 percent, to 801.6 million euros, or $1.06 billion. Sales at PPR’s CFAO African trading division gained 10.7 percent, to 593.7 million euros, or $785.6 million.

PPR stock rose 0.3 percent to close at 127.89 euros, or $169.19, in trading on the Paris Bourse.

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