PARIS — Reflecting a challenging market, with retail hit harder than luxury, French conglomerate PPR said first-quarter sales slipped 2.6 percent to 4.78 billion euros, or $6.25 billion.
This story first appeared in the April 22, 2009 issue of WWD. Subscribe Today.
At comparable exchange rates, the decline stood at 4.9 percent, with only the Gucci brand and the African trading company CFAO in positive territory, up 1 percent and 0.3 percent, respectively.
“We are in a period where visibility is very low and volatility is very high,” Jean-François Palus, PPR’s chief financial officer, told a conference call Tuesday. “The market in April is as sluggish as it has been in the last few months. Little improvement has been felt.
“We are very cautious,” he continued. “We are monitoring very closely everything we can.”
Sales at Gucci Group rose 5 percent to 855 million euros, or $1.12 billion.
Dollar figures are converted at average exchange rates for the period.
Stripping out currency effects, luxury sales fell 3.4 percent, reflecting a tough climate, particularly for so-called hard luxury.
Palus said watch sales at Gucci were down about 30 percent, while he described a “significant decline” in jewelry sales at Boucheron.
Geographically, business varied widely, with emerging markets still lapping up luxury and more mature markets shunning it. Luxury goods sales were down 17 percent in Japan, 9 percent in Western Europe and 8 percent in the U.S., Palus said. “Japan’s luxury goods market continues to deteriorate,” he lamented.
By contrast, Gucci Group sales in emerging markets, which account for 32 percent of sales, jumped 21 percent, with Asia-Pacific leaping 25 percent and greater China 13 percent. Palus stressed future expansion would center on emerging markets such as China.
Showing good resilience, the cash-cow Gucci brand saw first-quarter sales rise 10.6 percent to 567.1 million euros, or $741.8 million. Fashion and leather goods posted a 4 percent increase, with Palus singling out the New Jackie among handbag hits.
He noted the brand would continue to reinforce its upscale nature. “The Gucci brand has been consistent in the past four years and has traded up, increased quality and upgraded positioning. We are very cautious not to decrease our prices,” he said.
By contrast, Bottega Veneta wobbled, with sales falling 28 percent in Japan and 26 percent in Europe. Gains of 32 percent in Asia-Pacific tempered the total first-quarter sales decline of 2.3 percent, or 13.4 percent at comparable exchange, to 103.7 million euros, or $135.6 million. During the question-and-answer period, Palus suggested consumers are seeking shelter in more established brands like Gucci while Bottega, still under construction, is “more fragile in a difficult environment.”
Sales at Yves Saint Laurent fell 5.4 percent (10.2 percent at comparable exchange) to 59.7 million euros, or $78.1 million, as traffic fell in its retail stores in all regions. Ready-to-wear and footwear showed better resilience than YSL’s leather goods, PPR noted.
Sales at “other brands” slipped 5.8 percent to 124.3 million euros, or $162.6 million, with Balenciaga sales expanding due to its retail expansion and strong collections of leather goods. PPR described a “slight” increase at Alexander McQueen and a “contrasted performance” at Stella McCartney. Sergio Rossi’s sales were impacted by the shuttering of its retail stores in the U.S., Palus noted.
The activewear brand Puma, where PPR controls 69.4 percent of voting rights, posted a 3.6 percent rise in sales to 697.4 million euros, or $912.2 million. At constant exchange, sales fell 3.3 percent, with apparel weaker than footwear.
Palus noted Western Europe was “sluggish” for Puma, but the brand posted a strong increase in Latin America and posted “solid” growth in the U.S., driven by footwear.
PPR’s retail banners reflected anemic consumer demand in Europe, with sales down 4.5 percent at the book, music and electronics chain Fnac, down 5.4 percent at catalogue retailer Redcats Group and down 10 percent at furniture chain Conforama, which closed four stores in Italy in the quarter in the face of a 20 percent decrease in that country.