By  on March 10, 2006

PARIS — PPR on Thursday said luxury goods drove its 2005 net income ahead by 11.2 percent, and voiced "confidence" for 2006, thanks to a robust start at Gucci Group and improved retail conditions at home.

Luxury sales through the end of February grew 19 percent, with contributions from all the group's brands, especially Gucci, but also Bottega Veneta, Balenciaga and the long-struggling Yves Saint Laurent.

"Luxury should have a very solid year," PPR chairman and chief executive Francois-Henri Pinault predicted at a meeting of analysts and reporters here.

Organic growth continues to be PPR's top priority, Pinault said. But he didn't rule out "strategic" acquisitions, and said the Redcats mail-order division would profit from the purchase of a nonclothing operation with a solid Internet presence in the U.S.

Questioned repeatedly about PPR's intentions regarding acquisitions, Pinault stressed any addition would have to be "complementary" to the group's existing portfolio. Pinault declined to comment on speculation that PPR was shopping around its Printemps department stores.

Net income at PPR — which also operates Fnac, a book, record and electronics chain; the Conforama furniture franchise, and an African trading company called CFAO — advanced 11.2 percent last year, to 539 million euros, or $671.3 million.

Recurring operating income grew 9.9 percent, to 1.08 billion euros, or $1.34 billion, on a 4.2 percent rise in revenues to 17.76 billion euros, or $22.12 billion. Currency conversions were made at average exchange rates for the year.

Pinault said "better" times were ahead for PPR's retail operations, which have been beset by soft consumer spending in the home market of France and elsewhere in Europe. Through February, Pinault said retail sales increased 4.2 percent.

Luxury goods continued to be the star, however. PPR's bullish performance underscored rosy days for Europe's main luxury players, including rival LVMH Moët Hennessy Louis Vuitton, where 2005 profits leaped 21 percent.

Operating income at PPR's luxury division vaulted 35.4 percent, to 390 million euros, or $485.7 million, compared with a 0.7 percent decline in operating income at retail operations to 754 million euros, or $939 million.

The Gucci brand was the cash cow, with operating income increasing 14.7 percent, to 485 million euros, or $604 million. Pinault projected similar momentum this year and said aggressive spending on marketing would continue. Last year, communication budgets rose 31 percent at Gucci.

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