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Pinault Quells PPR Debt Fears

PARIS — Pinault Printemps Redoute, the diversified retailer controlled by François Pinault, is on the defensive. <br><br>Instead of discussing its first-half sales, which dipped 1.5 percent to $13.21 billion Serge Weinberg, its chief...

PARIS — Pinault Printemps Redoute, the diversified retailer controlled by François Pinault, is on the defensive.

Instead of discussing its first-half sales, which dipped 1.5 percent to $13.21 billion Serge Weinberg, its chief executive officer, spent much of a conference call Thursday debunking market speculation about the group’s debt level, short-term financing and strategy concerning Gucci Group, in which it holds a controlling 53 percent stake.

“The rumors concerning our group are preposterous,” Weinberg charged. “There’s a schizophrenia on the market. My confidence in this group is strong and the current market valuation is not a relevant reflection of what we are.”

PPR stock has been battered on the Paris Bourse over the last few weeks, losing 35 percent of its value since the beginning of the month. It is down 43 percent for the year.

In trading Thursday, however, the stock regained some lost ground, increasing 8.7 percent to close at $90.06. Dollar figures are converted from the euro at current exchange rates.

In April, Standard & Poor’s downgraded PPR’s debt rating to just above junk status. This week the debt-rating agency maintained a stable outlook on the group.

Weinberg asserted Thursday that PPR has “no liquidity issues,” and that it would concentrate on reducing debt and increasing cash flow. He declined to provide specifics on how that would be accomplished.

As for Gucci, he said PPR “strongly believes that the Gucci share price will be above $101.50 in 2004.” PPR in April 2004 is set to acquire outstanding Gucci shares, currently trading around $90.

“We believe that luxury is cyclical, and that it will recover in 2003-2004,” said Weinberg.

Meanwhile, Weinberg said that if Gucci’s stock remained under the $101.50 benchmark, PPR could relist about 30 percent of the Italian firm.

Although first-half sales were below analysts’ expectations and the $13.41 billion reported in the corresponding period last year, Weinberg voiced optimism that the slowly improving economic environment would help boost business in the second half.

Weinberg said PPR, whose holdings range from luxury with Gucci and consumer retailing with its FNAC music and book chain to construction and electronic materials, narrowed its sales decline in the second quarter. While sales declined 3 percent in the first quarter, they declined 1.6 percent on a comparable basis in the second quarter.

This story first appeared in the July 19, 2002 issue of WWD.  Subscribe Today.

“The evolution of PPR’s sales figures for the second quarter is encouraging and confirms the gradual upturn of business,” said Weinberg. “This evolution is in line with our targets.”

When pressed for specifics, however, Weinberg declined to offer full-year sales targets.

By activity, sales at the Printemps department store chain increased 0.4 percent to $426.6 million compared with $420.2 million last year. Sales at the Redcats mail-order division declined 4 percent to $2.24 billion, while sales at the Orcanta lingerie chain increased 34 percent to $21.1 million.

In North America, sales fell by 8.2 percent in the second quarter, compared with an 11.4 percent decline in the first quarter. Weinberg said he saw “some slight signs of recovery” in that market. “We are on the verge of recovery. It is slower than most of us expected, it is very slow and fragile. In Europe, the economy is stable. It’s not strong, but it’s stable.”

PPR is set to announce first-half earnings Sept. 5.