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PARIS — Moving a step closer to becoming a pure player in apparel and accessories, PPR said Tuesday it plans to demerge and float Fnac, a struggling retailer of books, music and home electronics.
This story first appeared in the October 10, 2012 issue of WWD. Subscribe Today.
PPR said the spin-off — via the distribution of Fnac shares to the shareholders of PPR — is intended to go ahead in 2013. Detailed terms are to be presented later following consultations with works councils.
“This project of demerging Fnac reflects our strong confidence in the company’s future,” said François-Henri Pinault, chairman and chief executive officer of PPR. “This project will enable our group to pursue its transformation and to fully focus on the development of its apparel and accessories brands.”
Last year, Fnac represented 34 percent of PPR’s total business, generating revenues of 4.17 billion euros, or $5.81 billion at average exchange. The chain nearly rivals the entire luxury division in revenues (4.91 billion euros, or $6.85 billion) but trails it in profitability by a factor of almost 10.
Parent of brands including Gucci, Balenciaga, Stella McCartney, Puma and Volcom, PPR also intends to dispose of its Redcats catalogue businesses and said announcements are likely to be issued in the coming weeks. As reported, PPR is likely to sell Redcats in pieces, with TPG Capital said to be among parties interested in the U.S. catalogues.
Founded in 1954 and owned by PPR since 1994, Fnac operates about 154 stores in France, Spain, Portugal, Brazil, Belgium and Switzerland.
While anemic demand in its core European markets has weighed on Fnac results in recent years, PPR on Tuesday billed it as an “extremely robust” brand with a “highly advanced multichannel strategy through its store network and its Web site.”
In January, Fnac said it would cut 500 jobs as part of turnaround efforts, prompting trade unions to picket outside PPR’s annual shareholders’ meeting last April.
As reported, Pinault hopes to triple the size of PPR’s core luxury and sport & lifestyle divisions by 2020 and increase revenues to 24 billion euros, or $31.1 billion at current exchange. In 2011 as a whole, PPR recorded sales of 12.23 billion euros, or $17.03 billion, up 11.1 percent on the previous year.
During a recent press day, Pinault reiterated that the group would look to buy mainly small and medium-sized firms with strong growth potential, saying that one of the areas it was interested in expanding was the outdoor segment.
PPR, originally an acronym for Pinault-Printemps-Redoute, began edging out of its roots in retail in 2006 when it sold the Printemps retail chain, following up with a stock market listing for African trading company CFAO in 2009 and a sale of the Conforama furniture chain to Steinhoff International in 2010.
PPR is to report third-quarter sales on Oct. 25.