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PARIS — “I like figures fine enough,” François-Henri Pinault said with a shrug.
It’s clear that the new chief executive officer of PPR, who officially takes over from Serge Weinberg today, does not live and die by numbers alone.
“I have a profile much more involved in product types of issues, marketing types of issues, and strategy rather than the pure financial business,” Pinault said about the changing of the guard at the French conglomerate. “Serge and I are very different. His career and my career are very different.”
But Pinault, one of the most powerful new figures on the international fashion scene, also stressed continuity, saying PPR would stay the course, focusing on organic growth and cash generation for its various retail holdings and the Gucci Group luxury division.
The goal, he said, is to maximize cash generation and reduce PPR’s debt load of 4.5 billion euros (about $6 billion), “which will give PPR in the long term the financial means to make different moves.
“First, we have to deliver the results in the next five years, building on this new strategy of retail and luxury,” Pinault said in an interview at the plush, art-stuffed headquarters of Artemis, the family holding company. “We will then be in a position to further develop the group.”
Yes, he’s alluding to the possibility of future acquisitions, and perhaps even entering into another business field beyond retail or luxury.
“It’s the approach of an investor,” he explained. “I don’t want to put all my eggs in one basket. The approach we have is to be in the right business at the right time.”
Pinault, who as president of Fnac — PPR’s music, book and home electronics chain — orchestrated the acquisition of the Surcouf electronics chain in the late-Nineties, made it clear that PPR could further expand its retail arm, which generates about 84 percent of revenues via Printemps department stores, the Conforama furniture chain, Redcats mail-order catalogues and the CFAO African trading company.
“We have a huge game to play,” he said. “A luxury brand beyond a certain size could lose its exclusive dimension and then be in danger. For example, I don’t think a brand could reach sales of more than 10 billion euros (about $13.3 billion), which is easy in the retail world.”
This story first appeared in the March 21, 2005 issue of WWD. Subscribe Today.
As for luxury, Pinault made it clear his definition of the sector is fluid, encompassing any product that boasts a strong brand, high gross margins, pricing power, superior quality and exclusivity.
“Ferrari is a luxury car. Falcon is a luxury plane. It’s a very, very large universe,” he said. “What we call luxury is not only fashion and accessories. For me, luxury is much wider than that.
“I’m really here to build something and to keep on building a group,” he said. “I’m really confident in the choices we make to be a worldwide player in these activities that can be enlarged if we consider the next 10 to 15 years.”
He also stressed he’s a firm believer in the multibrand business model, even if all luxury conglomerates currently rely heavily on one cash-cow brand for the majority of operating profits. The Gucci brand generates an estimated 141 percent of operating profits for the Gucci Group, meaning it offsets losses at its other businesses, which include Sergio Rossi, Alexander McQueen and Boucheron. YSL Beauté is profitable.
Luxury analysts have been calling on all conglomerates to trim their portfolios of brands that offer sub-par growth and profitability, and to focus on core competencies. In a recent report for HSBC in Paris, analysts Antoine Belge and Erwan Rambourg suggest PPR should focus on Gucci, Yves Saint Laurent and Bottega Veneta and take a more pragmatic attitude towards other businesses, disposing of them earlier rather than later if “things don’t work out as planned….Watches and jewelry — and perfumes and cosmetics even more so — do not constitute the group’s core competency,” they wrote. “In addition, nurturing three start-up brands (Stella McCartney, Alexander McQueen and Balenciaga) at the same time is too much.”
Gucci Group ceo Robert Polet has said there would be no brand disposals as he set 2007 breakeven targets for emerging brands and a goal to double the size of Gucci in seven years.
Pinault stressed that a multibrand model can be effective as a means to cover multiple categories of luxury on a worldwide basis. For example, “you cannot cover the overall market of ready-to-wear and accessories with one brand.”
But he acknowledged the conglomerate approach is still young and unproven.
“All of us have to prove that we are able to develop other very consistent brands at the same level as the leading brand. This is our objective with brands like Bottega Veneta and YSL,” he said.
“The multibrand strategy is still at the beginning. The luxury business is very young. Until 15 years ago, it was a local business.”
Indeed, he’s convinced PPR’s success on the retail side, where businesses are grouped around equipment for the home and the person, can be duplicated for fashion.
“It’s really consistent and resistant. The multibrand model we have developed in the retail side of the group is very strong and we are convinced it’s possible to do that on the luxury side,” he said. “We have a huge potential for organic growth in the next five years, on the retail side and the luxury side.”
Asked to identify the key issue for the luxury business, Pinault responded, “having a vision.”
Noting that all luxury customers travel worldwide, having similar stores and merchandise in various cities poses a challenge.
“We need to address this. The brand has to be exciting everywhere and surprise the customer,” he said. “I think we will have to diversify our offerings. It’s not only an issue in terms of creativity and merchandising, but also production.”
Pinault, who in June 2003 succeeded his father François at the head of Artemis, is proving to be more hands-on with the business by taking an operating role at PPR. “Afterwards, it was my decision to see if I should stay at Artemis or be more involved at PPR,” he explained.
Weinberg, the elder Pinault’s chief deputy for some 15 years, is exiting the group to set up a private equity fund called Weinberg Investissement.
With his custom-made Gucci suits, taste for luxury watches and sunny disposition, Pinault has plunged himself into the fashion spotlight, perhaps more than any other PPR executive.
Still, he acknowledged the steep learning curve and emphasized an approach to decision-making in which brand ceo’s are fully empowered. For example, the decision earlier this month to promote Gucci accessories designer Frida Giannini to oversee all women’s categories came initially from Gucci chief Mark Lee. That meant the exit of Alessandra Facchinetti, who got mixed reviews after showing two ready-to-wear collections for Gucci in the post-Tom Ford era.
“Alessandra Facchinetti is a very gifted designer, and I have always appreciated her talent. I’m sorry it didn’t work out with Gucci, but I want to thank Alessandra for her contribution to Gucci, and wish her great success in the future,” Pinault said.
Pinault said he accepts PPR has faced skepticism in the industry for its lack of experience in the luxury realm.
To that charge, Pinault said the solution is “to have the best professionals in charge of those businesses: the right teams at the right level. It’s much more a state of mind. You have to be surrounded by very good professionals. If we had taken the decisions without the luxury professionals we have in the group, that would have been dangerous.”
Pinault assumes the ceo reins at a tough time for business, and he said he prefers the uphill climb.
“It’s very motivating,” he said. “The right move is when it’s difficult.”
For example, he cited the case of Neiman Marcus, which, in the grim post-Sept. 11 environment, embarked upon an upscaling strategy.
“It’s incredible what they did,” he said. “It was not obvious at all in 2001 to make this move. A very difficult environment helped them to make the right move.”