PPR TAKES STEP TOWARD GUCCI-BASED LUXURY FIRM
Byline: Sarah Raper / Katherine Weisman
PARIS — Pinault-Printemps-Redoute chairman Serge Weinberg said Wednesday that the campaign to build a new multibrand luxury powerhouse around Gucci is nearing its first big potential step.
PPR — the distribution and retail conglomerate — and its new partner Gucci are wrapping up due diligence on Sanofi Beaute, and Gucci’s board will vote on whether to purchase the fashion and fragrance company on Oct. 8. In March, PPR rescued Gucci from a hostile takeover attempt by LVMH Moet Hennessy Louis Vuitton and now owns 42.5 percent of the Italian company.
When they unveiled their partnership last March, PPR and Gucci also disclosed intentions to build a new multibrand luxury group through acquisitions, with Sanofi Beaute — which consists of the Yves Saint Laurent fashion and beauty businesses as well as the beauty brands of Oscar de la Renta, Van Cleef & Arpels, Roger & Gallet, Krizia and Fendi — looming as the first conquest. At the same time that PPR took its stake in Gucci, PPR’s controlling shareholder, Francois Pinault, acquired YSL from French pharmaceuticals group Sanofi for $947.1 million with the intention of transferring it to Gucci, a move that needs Gucci board approval.
Weinberg disclosed the news about Sanofi at a press conference here, where he announced that PPR’s profits for the first half rose 18.5 percent to $221 million, compared with $189.4 million a year ago.
PPR’s sales for the first half rose 13.6 percent to $9 billion, as previously reported. Dollar figures are translated from the French franc at current exchange.
Gucci’s first-quarter sales and profits for the period February through April 1999 were consolidated into PPR’s half-year results. Gucci contributed $57.9 million in operating income and $252.6 million in sales to PPR’s half-year results.
Also, PPR’s year-ago figures exclude a nonrecurring gain of 66 million francs related to the sale last year of the JM Bruneau office supply company, but it gave no figure including that gain.
Operating profits for the half gained 27 percent to $457.8 million. Excluding Gucci and store openings, Weinberg said, operating profits for the half would have increased 9.4 percent on a sales gain of 3.6 percent.
Operating profit in the six months at PPR’s retail group — including Printemps department store, the Conforama furniture chain, the Redcats mail order group and the FNAC book and music chain — was $146.5 million, up 15 percent over last year, on sales of $4.44 billion, up 13.2 percent.
Discussing developments in the retail group, Weinberg noted that the U.S.-based Brylane mail order division had recently scored several successes. The Redoute test catalog for the U.S., launched this summer, “exceeded our expectations,” he said, and he was upbeat about the Brylane home catalog.
Weinberg also claimed that the Printemps Paris flagship was the leader among department stores in the city for the first half, although he didn’t provide specific market share figures. He said the group was enthusiastic about a major renovation of Brumell, Printemps’ multi-level men’s store, which opens next month.
Many in the luxury goods industry expected PPR and Gucci, rich with $2.9 billion — the sum paid by PPR for its stake in Gucci — to go on a buying spree over the summer, but that didn’t happen.
Weinberg said that PPR and Gucci are reviewing “several” investment opportunities, while adding, “Don’t expect aggressive speculation. We are pursuing a relatively prudent growth strategy.”
“However, we have no intention of leaving our money parked in a bank,” he said.