PARIS — An uptick in September sales produced lower — but still stronger-than-expected — third-quarter revenues for Pinault-Printemps-Redoute.
While the company gave an upbeat assessment of recent sales results, analysts cautioned that continued sluggish spending in France, the retailer’s key market, could mean PPR faces a difficult finish to the year.
PPR’s third-quarter sales dropped 16.3 percent to $6.23 billion from $7.45 billion in the year-earlier period. Dollar figures are converted from the euro at current exchange, as PPR reported sales of 5.37 billion euros versus 6.42 billion euros in the comparable 2002 period.
Meanwhile, Serge Weinberg, chief executive of PPR, declined to be drawn into the drama building about the ongoing contract negotiations with Domenico De Sole and Tom Ford, chief executive and creative director, respectively, of PPR-controlled Gucci Group.
“It would not be appropriate to comment at this delicate time,” said Weinberg.
On Wednesday, as reported, De Sole indicated that a resolution of contract talks could come by the end of the month. De Sole and Ford’s contracts expire next year.
When asked if it was sound for Gucci and Yves Saint Laurent to employ the same designer for both brands, Weinberg said only, “Strong brands should have strong designers.”
Sources close to the negotiations said PPR is insisting that Ford not be allowed to continue designing both Gucci and YSL collections. A scenario outlined Thursday by one source had De Sole exiting the company and Ford ascending to chief executive, allowing the designer to maintain some degree of control over both brands.
In a research note issued Thursday, Morgan Stanley luxury analyst Claire Kent noted that Gucci’s current management “could still leave” because of the duo’s desire for autonomy and “PPR’s insistence that Ford does not oversee both (the) Gucci and YSL brands.”
PPR’s sales decline was mostly due to PPR’s divestiture of its business-to-business activities over the last year in favor of higher margin retail and luxury ventures. The surging euro also affected sales.
On a comparable basis, sales in the quarter increased 1.6 percent, said Weinberg, adding that September’s comparable-store sales gain was 7.1 percent.“We are carrying September’s sales momentum into the first two weeks of October,” reported Weinberg. “In the first two weeks of October, sales at Printemps have increased by 9 percent.”
The news came a day after Gucci Group reported a “surge” in retail sales since the beginning of August as the effects of SARS and the war in Iraq receded. In combination with improved third-quarter sales from LVMH Moët Hennessy Louis Vuitton and Burberry, Gucci’s update seemed to provide yet another indication that the global luxury industry was regaining its legs.
Weinberg noted that energetic retail sales since the start of the fall have come after a summer marred by a decline in tourism and unusually warm weather. At its flagship Printemps department store on the Boulevard Haussmann here, sales dropped 7.2 percent in the third quarter. Through the nine months, tourist sales at the store declined 23 percent.
Business has been stronger in Printemps’ 12 stores outside of Paris, where sales grew 1.8 percent in the quarter.
The sports division fared better, with sales gaining 12.9 percent, driven mostly by a 23.4 percent increase at the Made in Sport chain. Redcats, the mail-order division, saw sales decline 2.1 percent in the quarter, while revenue at the Orcanta lingerie chain grew 1.5 percent in the period.
Meanwhile, sales increased 1.2 percent at the Conforama furniture chain and 6.8 percent at the Fnac music and book retailer; but declined 9.3 percent at Rexel, the electric components supplier.
In the luxury division, corresponding to the sales from May to July already reported by Gucci, sales increased 1.1 percent. But, even with Gucci Group’s 47 percent drop in second-quarter net income, the company was bullish for the rest of the year, citing double-digit retail sales growth in several markets for the period from Aug. 1 through Oct. 12. Specifically, Gucci said constant-currency retail sales grew 20 percent in the United States, 14 percent in Japan, 16 percent in Hong Kong and China and 10 percent in Europe.
PPR’s stock closed up 4.2 percent to $94.54, or 81.50 euros, in trading Thursday on the Paris Bourse.