PARIS — More signs of a recovery in the luxury goods sector: PPR reported on Friday that sales picked up steam in the second quarter, with revenues rising 6.3 percent, and the momentum should continue through the second half of the year.
“From a macroeconomic point of view, we observed positive recovery signs in most of our markets during the first half,” PPR chairman and chief executive officer François-Henri Pinault said at a news conference here.
“We have every reason to expect an improvement in our luxury activities during the remainder of 2010. That does not prevent us from remaining particularly vigilant, given that the macroeconomic environment remains very volatile, blowing hot and cold with an immediate impact on the purchasing intentions of many luxury consumers,” he added.
Group share of net income for the first half of 2010 leapt 113.3 percent to 402.8 million euros, or $535.9 million, from 188.8 million euros, or $252 million, during the same period last year. Dollar figures are converted at average exchange rates for the periods in question.
PPR — whose assets span from books and electronics retailer Fnac to luxury brand Gucci — posted sales of 4.01 billion euros, or $5.11 billion, in the three months to June 30 versus 3.77 billion euros, or $5.13 billion, in the same period a year earlier, an increase of 2 percent on a comparable basis.
First-half sales rose 3.6 percent to 8.14 billion euros, or $10.83 billion, from 7.85 billion euros, or $10.48 billion, in the first six months of 2009.
The sales growth was led by Asia, excluding Japan, with China proving particularly dynamic. Thanks to a weakening euro, Western Europe benefited from a rise in tourism from Asia and the United States, even as local consumers gradually flocked back to luxury — albeit on their tiptoes.
“Our groups are moving toward fewer logos, more discreet luxury,” Pinault noted. “It’s a question of adapting our ranges very rapidly to this new perception of luxury, a luxury which is more subtle, more sophisticated — which is what we are doing.”
The Gucci Group division — with brands including Yves Saint Laurent, Bottega Veneta and Sergio Rossi — reported revenues of 929.3 million euros, or $1.18 billion, in the second quarter versus 787.3 million euros, or $1.07 billion, in the year-ago quarter — up 18 percent in reported terms and 10.9 percent in comparable terms.
Thanks to ongoing efforts to optimize store-opening costs, the luxury division expects to end the year with 56 additional units, versus initial plans for a net increase of 41 stores, Pinault revealed.
Stella McCartney, Alexander McQueen and Balenciaga — three smaller brands within the division whose results are not broken out separately — posted strong double-digit sales growth and improved profitability in the first half, he added, noting PPR was considering providing the Balenciaga figures in the future.
The ceo said Gucci Group posted “disappointing” first-half results in the U.S., due in part to poor inventory management, but he expected a “significant” improvement by year-end following the nomination of two new presidents in North America for the Gucci and YSL brands, as reported.
Sales at Fnac rose 3.6 percent in the second quarter to 934.1 million euros, or $1.19 billion, while furniture chain Conforama registered a 10 percent increase to 683.6 million euros, or $872.3 million.
Mail-order division Redcats, which encompasses catalogue retailer La Redoute, saw sales edge down 1.3 percent to 852.5 million euros, or $1.09 billion, in the quarter. Puma, meanwhile, posted a 2.5 percent sales rise to 615.4 million euros, or $785.3 million.
Pinault said the positive performance of the retail division comforted PPR in its decision to hold out for a high price for these assets, which it wants to sell in order to grow its lifestyle segment around activewear brand Puma.
“We have received very serious inquiries regarding our assets. I imagine that after the results posted by our retail assets as of end-June, this process will accelerate even further,” he said.
PPR said as of June 30, it had available cash and equivalents of 927 million euros, or $1.13 billion, in addition to 6.32 billion euros, or $7.72 billion, in untapped medium-term confirmed lines of credit.
However, Pinault reiterated that a sale of PPR’s retail assets was a precondition to any further important acquisitions, as the group was attached to its BBB- rating from Standard & Poors.
He also reaffirmed his belief that, despite a slightly disappointing performance in the first half, Puma remained on track to grow sales organically to 4 billion euros, or $5.22 billion at current exchange rates, by 2015.
To that end, he gave the floor to Puma ceo Jochen Zeitz, who provided a rundown of Puma’s “revisited” phase four strategic plan ahead of a more detailed presentation scheduled to take place at the firm’s headquarters in Herzogenaurach, Germany, in tandem with the publication of its third-quarter results on Oct. 26.
“We feel confident to now reengage with our long-term strategy and corporate development to tap into the full potential of our brand and company in the coming years,” Zeitz said.
Pinault hinted the strategy will include building a stronger presence in China. “Four billion euros is just a stage. Frankly, my ambition is above that,” he said.
Shares in PPR closed up 0.3 percent at 102.65 euros, or $134.09, on Friday.
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