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PARIS — France’s PPR on Thursday said buoyant luxury sales and asset disposals drove full-year net income up 45.9 percent, but business has cooled recently at its retail operations in France.
Nonetheless, the luxury and retail conglomerate voiced optimism for the rest of the year, reporting a 15.1 percent increase in sales at Gucci Group in January and February.
“It’s very clear that there will be more growth in luxury this year,” said François-Henri Pinault, who on Monday will take over as chairman from Serge Weinberg. “Luxury is strong in the United States and Asia, even if it’s weaker in Europe.”
Meanwhile, Pinault said PPR wouldn’t bid on Neiman Marcus Group, which on Wednesday said it was up for sale. “It’s too expensive,” he quipped.
PPR declined to comment on market speculation Thursday that it wanted to grow its Redcats catalogue business in the U.S. by acquiring J. Crew or Lands’ End, which Sears, Roebuck & Co. is shopping around.
PPR’s net income last year reached 940.6 million euros, or $1.17 billion at average exchange, up from 644.6 million euros, or $801.79 million, last year, boosted by strategic divestments such as the Rexel electronic components provider and the Fineraf consumer credit business.
The sale of Rexel in December was the final step in a major strategic realignment at PPR, away from its traditional business-to-business activities toward higher margin retail and luxury.
“Last year marked the successful completion of the group’s transformation as we took full operating control of Gucci Group and sold our remaining noncore businesses,” said Weinberg.
“The strong sales momentum and sharply improved profitability achieved in 2004 clearly show that PPR is entering a new chapter in its history under most auspicious terms,” he added.
In a brief presentation, Pinault saluted Weinberg’s achievements at the helm of PPR over the last 10 years. “We will follow the strategy we have put in place,” he said.
Pinault touted luxury as a key avenue of growth in years to come. “We must grow the brands to improve sales and profits,” he said. “We have the cash flow needed to assure this growth.”
This story first appeared in the March 18, 2005 issue of WWD. Subscribe Today.
Last year PPR cut its debt from 5.03 billion euros, or $6.26 billion, to 4.53 billion euros, or $5.63 billion, on Dec. 31.
As reported, sales at PPR last year declined 0.6 percent to 24.21 billion euros, or $30.11 billion, reflecting disposals.
Sales of luxury goods, which account for 16 percent of PPR’s revenue and 27 percent of its operating income, rose 25.6 percent to 3.21 billion euros, or $3.99 billion, from 2.55 billion euros, or $3.17 billion, a year ago.
These sales at Gucci Group represented a 14-month period as PPR harmonized Gucci’s reporting schedule with its own financial calendar. PPR took control of Gucci last year.
On a pro-forma basis, or for the 12 months ending Oct. 31, Gucci’s EBIT, or operating income, grew 80.4 percent to 300.8 million euros, or $374.1 million, led by a 22.3 percent increase in EBIT at the Gucci brand, PPR said.
At the money-losing YSL brand, which narrowed losses last year to 69.3 million euros, or $86.2 million, from 74.1 million euros, or $92.2 million, a year ago, Weinberg said results had started to improve.
Boosted by the launch of its Cinema fragrance, operating income at YSL Beauté grew 81.7 percent to 22.9 million euros, or $28.5 million.
In the retail division, operating income at the Conforama home chain grew 2.7 percent to 226 million euros, or $281.1 million, while operating income at the Fnac music and book chain grew 12.2 percent to 150.6 million euros, or $187.3 million.
Income at the Printemps department store chain climbed 6.2 percent to 27.4 million euros, or $34.1 million, and income at the Redcats mail order division grew 5.5 percent to 230 million euros, or $286.1 million. CFAO, PPR’s African trading company, saw operating income advance 6.2 percent to 163.4 million euros, or $203.2 million.
Weinberg said he expected retail sales, which grew at a slower-than-expected 3.6 percent in the first two months of the year, to pick up in France after a spell of unusually late cold weather and a disadvantageous sale calendar, which is determined by the government in France.
PPR’s stock edged down 0.36 percent in trading on the Paris Bourse to close at 83 euros, or $111.22 at current exchange.