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The Lap of Luxury: Leather Goods Propel PPR’s 3Q Sales

Driven by lusty demand for leather handbags and shoes, luxury goods sales at PPR advanced 11.6 percent in the third quarter to 784.7 million euros, or $957.7 million, a 15.3 percent gain in organic terms.

PARIS — Driven by lusty demand for leather handbags and shoes, luxury goods sales at PPR advanced 11.6 percent in the third quarter to 784.7 million euros, or $957.7 million, a 15.3 percent gain in organic terms.

The French conglomerate’s results signaled continued momentum for high-end products, particularly in North America and Asia, and also strength in the discount channel. Sales at PPR’s far-flung retail activities were up 5.1 percent in the quarter ended Sept. 30 to 3.43 billion euros, or $4.18 billion, boosted by sharper pricing at the discount Conforama furniture chain.

“It’s been a good quarter. We are in good shape as we enter the final months of the year,” an upbeat François-Henri Pinault, PPR chairman and chief executive officer, told analysts during a conference call on Thursday. “We are confident that the end of the year will be very good for our luxury brands.”

While Yves Saint Laurent sputtered in the quarter, Pinault noted that Balenciaga is on track to break even this year and be profitable in 2006. He also anointed fast-growing Bottega Veneta as a “true luxury goods powerhouse.”

Overall, group sales increased 6.3 percent to 4.21 billion euros, or $5.13 billion, a 7.5 percent rise excluding the impact of exchange rates and other factors. Currency conversions were made at average exchange rates for the period.

PPR said growth in luxury was driven by categories with the highest margins, with leather goods up 29.1 percent and shoes leaping 19 percent. By region, sales jumped 28.1 percent in Asia-Pacific and 21.2 percent in North America.

And in a veiled jab at rival group LVMH Moët Hennessy Louis Vuitton, Pinault boasted that sales of fashion and leather goods in the quarter were up 21.4 percent to 508 million euros, or $620 million. That is how diversified LVMH groups its business units. LVMH recently reported a 12 percent rise for that division in its third quarter.

For PPR, sales at the cash-cow Gucci brand advanced 13.4 percent to 459.3 million euros, or $560.6 million, in the quarter, with the company citing strength across all product categories and double-digit gains in all geographic regions. Sales of leather goods advanced 23.9 percent, with the upscale leather line La Pelle Guccissima a standout.

Pinault said nine of the top-10 best-selling leather handbags are from that line, which features the house’s GG logo embossed on the leather. He also noted the popularity of its Treasure bag, an envelope-esque style that comes in a range of materials.

Pinault trumpeted “significantly higher” orders for Frida Giannini’s debut ready-to-wear collection shown on the Milan runway last September — even reading excerpts of Suzy Menkes’ glowing review in the International Herald Tribune.

Bottega Veneta also reflected strong demand for upscale products, with sales in the quarter up 65.5 percent to 45.3 million euros, or $55.3 million.

YSL saw its sales slip 5.1 percent to 45.6 million euros, or $55.6 million, a 2.9 percent dip on a comparable basis. Pinault said delays in leather goods deliveries affected the quarter, “but these problems are now solved.” He noted that orders for Stefano Pilati’s new cruise and spring collections were “significantly above” 2004 levels.

Amid what it described as an intensely competitive environment, YSL Beauté saw sales slip 3.6 percent to 150.2 million euros, or $183.3 million, with fragrance sales declining 12.1 percent in the quarter. Bright spots included makeup sales, up 34.7 percent on a comparable basis, and skin care up 12.7 percent.

Gucci Group’s other brands — which include Balenciaga, Boucheron, Stella McCartney, Alexander McQueen, Sergio Rossi and Bedat & Co. — reported a 26.2 percent increase in third-quarter sales to 84.3 million euros, or $102.9 million. Designer brands recorded growth in excess of 50 percent, with Balenciaga’s sales doubling. During the conference call, Pinault noted that half of Balenciaga’s volume comes from leather goods like its popular “lariat” handbag.

PPR’s retail activities were not as robust as luxury, but better than the second quarter due mainly to a rebound in long-sluggish France. Sales at the Printemps department stores slipped 0.2 percent to 158.1 million euros, or $192.9 million, up 1.3 percent on a comparable basis.

Sales at the cataloger Redcats inched up 0.2 percent to 978.8 million euros, or $1.19 billion, led by demand for children’s clothes and accessories. Pinault cited softness in the U.K. due to the July subway bombings and “increased competitive pressure” in Scandinavia and said Hurricane Katrina affected 7 percent of its customer base in the U.S.

PPR said sales at Fnac, the music and book chain, grew 9.6 percent to 943.7 million euros, or $1.15 billion, while sales at the Conforama furniture stores rose 4.9 percent to 824 million euros, or $1 billion. Sales grew 10.2 percent to 508.1 million euros, or $620.1 million, at the CFAO African trading company.

Pinault said he expects strong demand for electronics in the runup to Christmas, and sales of flat-screen televisions to accelerate as consumers gear up for World Cup soccer and rugby events in 2006.

Shares in PPR gained 2.6 percent Thursday to close at 86.10 euros, or $103.92 at current exchange, on the Paris Bourse.