By  on July 29, 2005

PARIS — PPR, French tycoon François Pinault's luxury and retail conglomerate, said on Thursday that double-digit gains at Gucci Group offset soft retail sales at home as second-quarter revenue rose 4 percent to 3.99 billion euros, or $5.03 billion based on average exchange rates.

Luxury sales gained 12.5 percent to 639.3 million euros, or $805.7 million, while retail grew 2.5 percent to 3.35 billion euros, or $4.22 billion, PPR said in a statement.

PPR chairman François-Henri Pinault said during a conference call he was "quite confident" for the remainder of the year, saying that retail momentum in July was "better" than June. He reported continued "strong activity" in luxury.

Analysts applauded PPR's luxury performance, the latest positive indication for the sector from Europe's big firms, but some pointed out that retail came in weaker than expected.

PPR stock on the Paris Bourse rallied late in the day to close up 0.36 percent to 84.30 euros, or $102.

Pinault said sales at the Gucci brand increased 19 percent on a comparable basis to 378.6 million euros or $477.1 million.

Sales of leather goods, which account for 55 percent of the brand's sales, advanced 32.1 percent because of new handbag lines such as Hasler, Pelham, Punch and Creole.

Gucci's sales increased across geographic zones, with comparable sales up 24.2 percent in North America, 28.9 percent in Asia, and 15.3 percent in Europe. The brand's sales increased 10.6 percent in Japan.

Pinault said Gucci orders for the fall collection were "extremely strong" and added that the brand had opportunities to grow in China and Russia.

Pinault praised Bottega Veneta, saying comparable sales there grew 55.8 percent to 32.6 million euros, or $41.1 million, with high double-digit growth across all geographical zones.

At the money-losing Yves Saint Laurent fashion house, Pinault said sales were "disappointing," mostly because of the "lack of a best-selling bag this season." He said steps had been taken to reverse the trend, noting that YSL recently hired accessories designer Raphaelle Hanley, formerly with rival Louis Vuitton, to boost the important leather goods category.

Pinault said strides also were being made to bolster YSL's ready-to-wear sales, which increased 5 percent in the three-month period ended June 31. He said a new knitwear collection was in the works and the shoe and coat categories were being broadened. He added that the house would continue to make efforts to create clothes suited to all times of the day.YSL Beauté sales rose by 3.3 percent. Sales of YSL-branded fragrances increased 6.2 percent thanks to strong sales of Cinema and Rouge Pure Shine lipstick, Pinault said.

PPR's so-called "other brands" — Boucheron, Balenciaga, Stella McCartney and Alexander McQueen — added 64.9 million euros in sales, or $81.8 million, up 45.8 percent, with the strongest gains posted by Boucheron, Balenciaga and Alexander McQueen.

Pinault said Balenciaga had a "spectacular" 300 percent increase in sales of leather goods and that McQueen's new push into leather goods via his Novak handbag was promising.

At the Boucheron jewelry business, Pinault said turnaround efforts were proceeding ahead of schedule and that the brand had introduced more access price-point products.

The numbers were the most recent in the spate of figures from Europe's big luxury players this week.

On Monday, Bernard Arnault's LVMH Moët Hennessy Louis Vuitton group said its second-half sales grew 9 percent, driven by double-digit gains at its core Louis Vuitton brand. Also this week, Bulgari reported quarterly sales up 8.7 percent, and Tod's reported second-quarter growth of 8.4 percent.

European retail is faring worse. PPR's retail division, for example, continues to suffer from low consumer confidence in France.

Most indicative of the trend was the 4.1 percent decline in sales to 175.6 million euros, or $221.3 million, at PPR's Printemps department store chain.

At its other retail activities, PPR said sales at Fnac, the music and book chain, grew 5.2 percent to 892.6 million euros or $1.13 billion, while sales at the Conforama furniture stores inched up 0.2 percent to 655.2 percent. At the Redcats mail-order division, sales increased 1.1 percent to 1.14 billion euros, or $1.44 billion, and sales grew 7.5 percent to 499.4 million euros or $629.4 million at the CFAO African trading company.

PPR is scheduled to report first-half earnings Sept. 8.

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