PARIS — Retail and luxury conglomerate Pinault-Printemps-Redoute failed to meet market expectations on Thursday as it reported weaker-than-expected second-quarter sales that were hampered by spring strikes and social unrest in its key French market, as well as its own portfolio trimming.
Sales in the three months through June 30 declined 9.7 percent to $6.68 billion, or 5.97 billion euros, from $7.4 billion, or 6.61 billion euros, a year ago. Through the first six months, sales slid 7.8 percent to $13.74 billion, or 12.27 billion euros, from $14.9 billion, or 13.31 billion euros, last year. Dollar figures have been converted from the euro at current exchange.
Analysts had projected a 7 percent decline in second-quarter revenue to about $6.83 billion, or 6.1 billion euros. PPR shares closed down 2.6 percent to close at $75.52, or 65.65 euros, on the Paris Bourse.
“The results are mildly disappointing,” commented Eric Tibi, analyst at UBS in Paris. “But in a sluggish market, this isn’t a profit warning.”
PPR’s business strategy also hurt sales results. Over the last year, it’s realigned its profile, divesting business-to-business activities to focus on higher-margin retail and luxury segments.
On a conference call, Serge Weinberg, chief executive of the firm, said sales at the so-called “new PPR,” or the retail and luxury arm, grew 1.7 percent in the second quarter, underscoring the soundness of the new direction.
Weinberg said PPR would improve gross margins and earnings before interest and taxes in its retail division when it reports its first-half profits in September. However, he did not specify by how much. French companies report profits and sales separately.
As for Gucci Group, the luxury unit in which PPR holds a controlling 64.5 percent stake, Weinberg echoed sentiments expressed by Gucci’s chief executive Domenico De Sole that sales have begun to improve.
“Sales in Japan and the United States, which account for 70 percent of [Gucci] sales, are picking up nicely,” he said. “We remain confident that after a tough April that there will be a dramatic improvement.”
Among its retail activities, the Fnac book and music retailer performed best, gaining 6.9 percent to $873.6 million, or 780 million euros, in the second quarter. Meanwhile, sales at the Redcats mail-order division, which declined 7.7 percent to $1.22 billion, or 1.09 billion euros, and the Conforama home furnishings chain, which dropped 0.7 percent to $690.4 million, or 616.4 million euros, were below analysts’ expectations. Redcats was dragged down by the negative impact of exchange rate fluctuations and Weinberg said sales in the U.S. fell 7.7 percent. “But there seems to be an improvement in early July,” he noted.At the Printemps department store chain, sales were flat at $234 million, or 209 million euros. Weinberg said the Boulevard Haussmann flagship had suffered a 26 percent decline in tourist traffic and was equally hindered by rampant strikes in Paris.
Outside of Paris, Printemps’ other stores in France improved revenue by 3.1 percent.
“The market in France should remain sluggish,” Weinberg said. “But we have seen some change of mood in the U.S. Should the U.S. improve in the second half, this improvement usually comes to Europe six to nine months later.”
He added that after a poor first two weeks of June, sales were better. “The second part of June was stronger and the trend in the first two months of July is in line with the second part of June,” he said.
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