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PARIS — Luxury appears to be winning out over sport.
This story first appeared in the April 26, 2012 issue of WWD. Subscribe Today.
French retail-to-luxury group PPR said Wednesday that revenues rose 15.4 percent in the first quarter, as sales at luxury brands including Gucci, Yves Saint Laurent and Bottega Veneta powered ahead, even as sporting goods firm Puma and retailer Fnac registered disappointing performances.
PPR posted revenues of 3.26 billion euros, or $4.27 billion, in the three months to March 31, versus 2.82 billion euros, or $3.86 billion, in the same period a year earlier, up 7.9 percent on a comparable basis. Dollar figures are converted at average exchange rates for the periods to which they refer.
The luxury division — which also includes brands such as Balenciaga, Alexander McQueen and Stella McCartney — posted revenues of 1.46 billion euros, or $1.91 billion, in the first quarter compared with 1.13 billion euros, or $1.54 billion, in the year-ago period — up 29.1 percent.
The sales data came on the heels of figures showing sales at LVMH Moët Hennessy Louis Vuitton rose 25.4 percent in the first quarter, while Burberry revenues were up 16.1 percent in its fiscal fourth quarter, ended March 31.
“PPR delivered a highly satisfactory performance overall in the first quarter of 2012. Our luxury brands once again reported strong growth in all geographic areas, while our Sport & Lifestyle brands continued to move ahead,” PPR chairman and chief executive officer François-Henri Pinault said.
“This reinforces our confidence in PPR’s ability to deliver another year of brisk revenue growth, combined with gains in operating and financial performance, in 2012,” he added.
The overall sales increase was fueled by rapid growth in emerging economies, which now account for 37 percent of revenues in PPR’s core luxury and Sport & Lifestyle divisions. Chief financial officer Jean-Marc Duplaix noted that customers from mainland China represented 60 percent of sales at some Gucci stores in Western Europe.
He said PPR was confident in the strength and positioning of its core brands.
“Of course we keep a close eye on the market environments across sectors and across countries, which remain volatile and affect consumer confidence, but we believe that our performance this quarter provides us with a solid platform to further improve our operational and financial performance this year,” Duplaix said in his first conference call with analysts since he was appointed in December.
Nonetheless, group managing director Jean-François Palus said PPR was “frustrated” by the performance of Puma, the core brand within PPR’s Sport & Lifestyle division. Puma SE had earlier on Wednesday reported that consolidated sales gained 6.1 percent to 820.9 million euros, or $1.07 billion, in the first quarter. Net income fell 4.9 percent to 73.9 million euros, or $96.8 million.
“Puma’s sales performance in Western Europe and North America was not in line with the growth of these markets. This was chiefly due to lower than expected footwear sales, as Puma’s current collection and prices didn’t entirely match consumer expectations,” said Duplaix.
The Herzogenaurach, Germany-based firm is taking steps to address the shortfall, including clarifying and renewing its footwear portfolio and naming new senior managers in Europe, Asia and the U.S.
In a separate telephone conference, Puma ceo Franz Koch said the company was upbeat, heading into this summer’s major sporting events, which include the London Olympics and the UEFA European Football Championship hosted by Poland and Ukraine.
“I am confident that the product innovations we have in the pipelines will contribute to achieving our full-year sales and earnings target against the background of this extraordinary sports year,” said Koch.
Meanwhile, PPR’s retail banners again lagged its other activities.
Sales at Fnac fell 0.7 percent in the quarter to 916 million euros, or $1.2 billion. PPR has stripped out revenues from its mail-order business Redcats, which it is in the process of selling, but reported that its sales were down 0.5 percent in the quarter to 787.8 million euros, or $1.03 billion.
Palus said the process of off-loading Redcats — started in summer 2011 — was ongoing but did not provide further details. “Things are progressing quite well,” he noted.
Within the luxury goods division, sales at Gucci rose 16 percent in the quarter to 847.9 million euros, or $1.1 billion.
Sales in North America were up 9 percent in comparable terms, despite a tough comparison with the first quarter of 2011. Duplaix said PPR would shortly name a successor for Laura Lendrum, who earlier this month left the post of president of Gucci America for “personal reasons.”
“We believe that overall, the U.S. remains very dynamic both for Gucci, but also for the rest of PPR’s luxury brands, and we are still very positive on this market,” he added.
Japan registered a 16 percent increase, with Duplaix noting that Gucci was gaining market share. He added that the brand would have achieved double-digit growth in Japan in the first quarter even when stripping out the effect of the March 2011 tsunami, which caused sales to fall 7 percent in the first quarter of 2011.
Sales in Greater China rose 15 percent in comparable terms during the three-month period, but South Korea and Taiwan struggled due to a combination of tough economic conditions and store renovations, including a full refit of the Gucci flagship in Seoul, which reopened this week with a party attended by Gucci president and ceo Patrizio di Marco and creative director Frida Giannini.
“The markets are quite difficult in these countries due to high competition,” noted Duplaix. “We are quite aware that we need to adjust our product offer and we are working currently on reinforcing the merchandising in these countries.”
At Bottega Veneta, revenues rose 39 percent to 218 million euros, or $286 million.
“Handbags continued to set the pace with strong demand for iconic products in both traditional and seasonal colors,” said Duplaix. “It is important to note that Bottega Veneta recently decided to ban all markdowns on sales of leather goods. This decision resulted in a very sharp increase in full-price sales and clearly did not slow down [growth],” he added.
Yves Saint Laurent also continued on its strong growth trajectory, with sales up 43 percent in the quarter to 108.8 million euros, or $143 million, helped by strong sales of Cabas Chyc handbags and Tribtoo shoes.
“We believe that for this year, we will improve globally the profitability of the brands,” Duplaix said, referring to Bottega Veneta and YSL.
PPR does not break out figures for its other luxury brands, but the cfo reported “stellar” performances at Alexander McQueen and Stella McCartney, a “strong” quarter at Balenciaga and double-digit growth at newcomer Brioni.