By  on September 9, 2005

PARIS — Impressive gains at Gucci Group drove first-half net profits ahead 12.5 percent for PPR, offsetting declines at the French conglomerate's struggling retail arm.

Net income advanced to 169.6 million euros, or $218.2 million, from 150.8 million euros, or $185.1 million, a year ago. Income benefitted from a 76.4 percent leap in operating income at Gucci Group, PPR chairman and chief executive François-Henri Pinault told a meeting of analysts and reporters Thursday at the Pompidou Museum here.

Operating income grew 11.3 percent to 348.6 million euros, or $448.4 million, from 313.3 million euros, or $384.6 million, last year, Pinault said. Currency conversions were made at average exchange rates for the respective periods.

The numbers, which beat analysts' expectations, would have been better but for the impact of adverse exchange rates that wiped 38.9 million euros, or $50 million, off Gucci Group's 107.4 million euros, or $138.1 million, in operating income, Pinault said.

Coming a day after LVMH Moët Hennessy Louis Vuitton touted a 19 percent rise in net income, PPR's results point to a continued roll for luxury.

Pinault said sales of luxury products in July and August were along the same lines of the 12.5 percent gain clocked in the first half, and he voiced "confidence" for the remainder of the year.

Among bright spots, Pinault said first-half losses narrowed 9.1 percent at the Yves Saint Laurent fashion house, thanks to efforts by the new management and design teams. First-half losses at YSL totaled 40.1 million euros, or $51.6 million, down from 44.1 million euros, or $54.1 million, last year.

Pinault was upbeat on Bottega Veneta, the Italian fashion and leather house that achieved profitability for the first time with 2.1 million euros, or $2.7 million, in profits in the half.

Meanwhile, the chairman and ceo said losses were shrinking "beyond expectation" at Boucheron and Balenciaga and that those brands were on the road to break even "ahead of schedule."

Among "other brands" — including Boucheron, Balenciaga, Alexander McQueen, Sergio Rossi, Bedat & Co. and Stella McCartney — losses diminished by 39.9 percent to 25.7 million euros, or $33.1 million, Pinault said.YSL Beauté's losses widened to 18.8 million euros, or $24.2 million, due to currency exchange losses, as well as investments made to launch the YSL Cinema and Zegna Z scents.

Pinault said the Gucci brand continued to reap robust leather goods sales, as demand for the new La Pelle Guccissima had "exploded."

Less stellar were PPR's retail operations, which have struggled against a tepid economic climate in Europe, especially in France.

The division's operating income fell 4.2 percent to 268.8 million euros, or $345.8 million, mostly due to a 27 percent dive in operating income at the Conforama furniture chain, which has been renovating stores and revisiting its product offer.

Losses also widened to 2.3 million euros, or $2.9 million, at the Printemps department store chain.

Asked during a question period about persistent speculation that PPR will sell Printemps, Pinault replied: "I will not comment on rumors."

At the Redcats mail-order division, improvements in the U.S. and Scandinavia boosted profits 8 percent to 110.9 million euros, or $142.6 million, and profits rose 10.3 percent to 21.5 million euros, or $27.6 million, at the Fnac music and book chain.

PPR stock inched down 0.1 percent to close Thursday at 87.80 euros, or $109.22 at current exchange, on the Paris Bourse.

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