PARIS — The luxury sector remains in fine fettle, as PPR and Hermès International last week reported solid first-half profits and voiced confidence for the balance of 2008 despite currency headwinds and economic turbulence.PPR said net income in the first half catapulted 140.9 percent, largely due to a 421 million euro, or $644.1 million, capital gain on the sale of YSL Beauté, but also reflected a “very satisfactory level of profitability” in luxury goods.Hermès said its net income rose 5.3 percent to 134.9 million euros, or $206.5 million, from 128.1 million euros, or $196.1 million, a year ago, and noted that July and August sales were in line with robust growth in the first half, particularly in Asia, the United States and Europe.Hermès also disclosed that it increased its stake in Jean Paul Gaultier to 45 percent from 35 percent previously.Following are details on each company’s results.PPRNet income amounted to 779 million euros, or $1.19 billion, versus 323 million euros, or $494.4 million, a year ago. Income from continuing operations rose 17.3 percent to 344 million euros, or $526.5 million, from 293 million euros, or $448.5 million. Sales from continuing operations rose 12 percent to 9.58 billion euros, or $14.66 billion. Dollar figures are converted from average exchange rates for the period.“We are approaching the second half with confidence,” François-Henri Pinault, PPR’s chairman and chief executive officer, told analysts here at a presentation, moments after showing a clip of Jamaican sprinter Usain Bolt winning Olympic gold in Beijing wearing Puma. He then produced one of Bolt’s sneakers and displayed it on the desk in front of him.Running fast and staying fit were themes of Pinault’s discourse, asserting that the French retail and luxury conglomerate “has always been able to take advantage of periods of slower growth.” He said its various retail banners and luxury brands would improve commercial effectiveness, optimize operations and streamline costs in order to benefit from an “immediate competitive advantage as soon as there is an upturn.”While retailer Redcats and furniture chain Conforama remain trouble spots for PPR, operating profits at Bottega Veneta vaulted 60 percent at constant exchange to 51 million euros, or $78.1 million, and Yves Saint Laurent halved its operating loss to 12 million euros, or $18.4 million.Pinault declined to pinpoint a break-even date for YSL, but reiterated that it would likely do so when sales reach 300 million euros, “and we’re not very far from that.”“After Gucci, it’s the brand with the highest potential,” he said, hinting YSL would soon resume expanding its boutique network beyond the current 64. Operating income at the cash-cow Gucci brand was flat at 285 million euros, or $436.2 million, while EBITDA margins inched up to 31.6 percent. Gucci sales had stumbled in the first quarter, but have since “resumed a more traditional growth trend,” Pinault said, citing July and August trends that were in line with the acceleration in the second quarter.He noted Gucci sales are particularly dynamic in China, where “we are leading the race.”Operating income at “other brands,” which include Balenciaga, Sergio Rossi, Alexander McQueen and Boucheron, jumped 65 percent to 7 million euros, or $10.7 million.Pinault noted Balenciaga would evolve from a wholesale-driven business model as it expands its retail network, having recently added locations in Los Angeles and Cannes, France. “The new stores have a very good performance,” he said.Dynamism in some African economies led to a 19 percent jump in recurring operating income to 142 million euros, or $217.3 million, at the trading company CFAO, involved primarily in automotive and health care sectors.Operating income rose 3 percent to 26 million euros, or $39.8 million, at the book and music chain Fnac, but profits took a hit at Redcats, dogged by strikes and weak spending, and at Conforama, particularly in Italy and Spain. Pinault did not rule out store closures in those markets, but vowed no “brutal measures.”Shares in PPR gained 4.3 percent Friday to close at 79.72 euros, or $117.59, on the Paris Bourse.HERMES“We had a very good first half,” declared Mireille Maury, managing director of finance and administration at Hermès. “And July and August were still good — no significant change. All the geographic zones are growing. We see no sign of slowdown in the U.S.”Maury noted adverse currency continues to weigh on the figures. At constant exchange, net profits would have been up 20 percent.Hermès said it planned to continue investing in its retail network, emboldened by robust sales of silk scarves, leather goods and perfumes that lifted first-half sales 12.8 percent to 813.2 million euros, or $1.24 billion, with double-digit growth in all regions except Japan.Maury said 15 boutiques would be opened or enlarged in the second half, including a first store in Kunming, a third location in Beijing and a seventh boutique in Hong Kong. Openings outside of Asia include San Diego and Doha in Qatar.Hermès plans to enter Brazil next year, and christen a new men’s boutique on Madison Avenue, Maury added.Asked about the Gaultier transaction, Maury said the increased stake was part of the deal struck with the designer back in 1999. She pegged the investment at between 3 million and 4 million euros, or about $4.6 million to $6.1 million at current exchange.The designer and Gaultier president Christophe Caillaud were vacationing and not available for comment Friday. However, Maury suggested the ownership increase would not impact a business that is profitable and growing.Operating income at Hermès increased 14.1 percent to 203.8 million euros, or $311.9 million. Stripping out an exceptional gain from the disposal of shares in Leica Camera AG bonds valued at 7.2 million euros, or $11 million, the increase stood at 9.7 percent.Shares in Hermès eased 0.6 percent Friday to close at 97.26 euros, or $143.47, on the Paris Bourse.
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