By  on January 27, 2006

PARIS — Luxury boomed; retail lagged.

That was the news from PPR, owner of Gucci Group, as the French conglomerate said fourth-quarter sales improved 3.9 percent to 5.46 billion euros, or $6.49 billion, driven by "record" sales at Gucci and "exceptional" growth at Bottega Veneta, but weighed down by a weaker-than-expected retail performance.

"Our luxury goods brands had a truly outstanding year," said François-Henri Pinault, PPR chairman and chief executive. "Gucci generated record sales in the year. The momentum in luxury has continued in the first weeks of January."

Overall luxury sales surged 16.3 percent to 900.7 million euros, or $1.07 billion, in the three months ended Dec. 31, underscoring the sector's continued roll after robust sales reported last week from PPR's French rival LVMH Moët Hennessy Louis Vuitton. Currency conversions were made at average exchange rates for the respective periods.

Gucci wasn't PPR's only star. Pinault, in a conference call, said "triple-digit" gains at Balenciaga had been such that PPR was "reassessing the potential of Balenciaga and we are going to give it the resources to realize its potential."

Bottega Veneta zoomed ahead, too, with the leather house's sales gaining 74.9 percent to 49.2 million euros, or $58.5 million, surpassing Yves Saint Laurent's quarterly sales (44.3 million euros, or $52.7 million, down 2.4 percent) for the first time.

"We are now confident that [Bottega] is a tier-one brand," said Pinault. "It should reach a considerably higher level of sales in the medium term."

Pinault said jeweler Bouch­eron had "significant" increases in the quarter and 37 percent sales growth for the year, and that Sergio Rossi, the footwear firm, was "turning the corner."

Meanwhile, he lauded "strong" growth at Alexander McQueen and Stella McCartney, which should lead the two British designers to break even by or before PPR's target date of 2007.

Pinault suggested successful news from many of the company's luxury brands would fuel investment. "We are in a position to increase [investment] efforts if necessary to take advantage of the momentum of these brands," he said.

High-margin handbags and shoes sold briskly, said Pinault, with the cash cow Gucci label — which accounts for nearly 60 percent of PPR's luxury revenues — leading the charge.

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