By  on October 27, 2006

Paris — Luxury buoyed PPR in the third quarter as the French retailer on Thursday reported that revenue grew 5.8 percent in the three months through September, in line with most analysts' expectations.

Sales at the Gucci Group luxury division climbed 15.6 percent to 906.6 million euros, or $1.16 billion, while revenues at the retail division, bruised by declines at the Redcats catalogue business, advanced a modest 3.4 percent to 3.36 billion euros, or $4.28 billion. Currency conversions were made at average exchange rates.

PPR chief financial officer Jean-François Palus told a conference call that luxury "continued to benefit from strong conditions in every region expect Japan."

He predicted PPR would continue to "profit from a positive [luxury] context" through the end of the year.

Gucci brand sales increased 12.2 percent to 515.3 million euros, or $657.1 million. Though slower than the 21 percent growth logged by the Italian brand in the first half, HSBC luxury analyst Antoine Belge said the result "still rated as a strong performance."

Palus explained the lower sales stemmed from a decision to move the distribution of the brand's watches to more upscale accounts.

"We want to align the watches with the rest of the Gucci universe," said Palus, adding that as a result a number of wholesale watch accounts in Asia and the United States had been cut, resulting in a 19 percent decline in watch sales.

Excluding the impact of watches, Palus said Gucci revenues would have increased 16.9 percent, fueled by sales of La Pelle Guccissima leather goods and the 85th-anniversary handbag collection. Indeed, sales of leather goods increased 20.6 percent; ready-to-wear, 20.6 percent, and shoes, 21.9 percent.

Sales for Gucci were strong in most regions — up 17 percent in Europe, 18 percent in North America, and 14 percent in the Asia-Pacific zone — except Japan, where they improved 1.4 percent.

Palus said a new Gucci flagship slated to open in Ginza next week should help spark more sales in the island nation.

Elsewhere in the group, signs of turnaround continued at the money-losing Yves Saint Laurent fashion house.

YSL sales in the quarter advanced 18.6 percent, with good wholesale momentum from the pre-fall and fall-winter collection, as well as double-digit growth in leather goods, thanks to the success of the Muse and Double bag ranges.YSL Beauté grew 4.9 percent to 157.2 million euros, or $200.4 million, driven by sales of Yves Saint Laurent's new L'Homme fragrance and Perfect Touch makeup line. Stella McCartney's new In Two scent also added to the momentum, said Palus.

Fast-growing Bottega Veneta's star continued to rise. Its sales catapulted 52.9 percent to 69.2 million euros, or $88.2 million. Leather good sales, which make up 82 percent of overall Bottega revenues, grew 56 percent, while all other categories grew 63 percent.

Of the so-called other brands, Palus said Balenciaga continued with high-double-digit growth, thanks to robust sales in all categories and all regions. He said the Boucheron jewelry business logged "solid double-digit growth," while Alexander McQueen and Stella McCartney also saw "strong" double-digit growth.

PPR's retail division, which has been beset by tough market conditions in France and elsewhere in Europe, was less stellar.

Fnac grew 5.8 percent to 989.7 million euros, or $1.26 billion, while the Conforama chain improved 5.8 percent to 871.7 million euros, or $1.11 billion, and the CFAO African trading company gained 7.9 percent to 548.4 million euros, or $699.3 million. Sales at the catalogue business Redcats declined 3.2 percent to 947.7 million euros, or $1.21 billion, victim of a slow mail-order sector.

The poorer performances in the retail division have fueled speculation that PPR may divest more holdings after selling its Printemps department stores earlier this year to a group of investors that included La Rinascente president Maurizio Borletti. Most recently, rumors have raged that Fnac is on the block. A rumor Thursday said financial firm UBS had been mandated to sell the book-and-music chain. Palus declined to comment on the speculation, but UBS denied it.

PPR shares finished down 1.8 percent Thursday at 118.90 euros, or $148.62, in trading on the Paris Bourse.

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