Byline: Robert Murphy

PARIS — Bolstered by strong consumer spending, diversified French retailer Pinault-Printemps-Redoute registered a 22 percent increase in 2000 profits and predicted a continuation of double-digit sales growth for at least the next five years.
Profits for 2000 were $705.6 million, or $5.94 a share, from $577.8 million, or $4.98, a year ago
In a news conference Thursday, chairman Serge Weinberg called the results “historic” for PPR, controlled by French magnate Francois Pinault, and forecast annual sales growth over the next five years of 15 percent to 20 percent. As reported, PPR reported its highest revenue growth in two decades when in January it said sales rose 26.8 percent to $23.2 billion. French firms report sales and earnings separately.
While earnings met expectations, analysts were split by the boldness of Weinberg’s sales forecast. Some called it positive; others said it was below their expectations. PPR stock slid 3.5 percent in trading on the Paris Bourse to close Thursday at $194.58. Dollar figures were converted from the euro at the current exchange.
Weinberg defended the forecast, saying “higher growth for a group of our size seems unreasonable.”
“Growth of 15 to 20 percent over the next five years is strong for a distribution group,” agreed Nicolas Champ, analyst at Credit Lyonnais Securities Europe. “There are lots of firms that would love to achieve that number.”
Christian Devisimes, analyst at Natexis Capital, said he expects PPR to generate 20 percent growth for the next two years. “It seems impossible to forecast further into the future.”
On the other hand, analysts said 2000 profits were broadly in line with forecasts.
“I don’t see how one can do much better than 22 percent,” said Champ, referring to last year’s sales increase.
Weinberg said “organic” growth — that derived from continuing operations — of 7.8 percent in 2000 was the firm’s highest ever, up from 3.7 percent a year earlier. He attributed the growth to strong consumer spending as well as more aggressive marketing campaigns that successfully attracted a new customer base.
Weinberg said that, for the first time, more than half of PPR’s sales — 52.5 percent of the total — were generated outside of France. “Next year, we’re shooting for 60 percent of sales outside of France,” he said.
Including the 70,000-square-foot Citadium sporting goods and activewear store that bowed here last fall, new store openings played a significant role last year. Weinberg forecast Citadium sales would be about $43 million in 2001.
He said PPR is weighing rolling out the concept to other cities in France.
Over the next fiscal year, Weinberg said PPR plans to inaugurate 109 new stores, including 13 Fnac music, book and multimedia units and 20 Orcanta lingerie stores.
PPR’s fledgling luxury business was also trumpeted by Weinberg. Gucci, of which PPR acquired a 42 percent stake in 1999, was consolidated over the full year for the first time. In addition, last year Gucci acquired luxury jewelry firm Boucheron, fashion house Yves Saint Laurent and Sergio Rossi.
Gucci recently acquired 51 percent of Alexander McQueen and 66.7 percent of Bottega Veneta. Sales at Gucci Group were up 181.4 percent in 1999 to $2.07 billion, as reported. Weinberg said PPR and Gucci were working to create numerous synergies within the company. “Our luxury strategy is to develop equilibrium among our brands,” said Weinberg. “For example, Sergio Rossi is now making all of the shoes for Gucci and YSL, while YSL accessories are being produced by Gucci.”
Weinberg was particularly bullish about the progress made revamping YSL and centralizing management of the brand over the last year. “We started 1999 with 167 different licenses at YSL,” he said. “By December 2000, only 62 remained.”
Weinberg said he expects investments to reposition YSL to start bearing fruit in 2002. Meanwhile, addressing pending litigation over Gucci in the Enterprise Chamber of Amsterdam’s Court of Appeals with rival luxury group LVMH Moet Hennessy Louis Vuitton, Weinberg reiterated his “confidence” the court will rule in PPR’s favor.
A decision to launch an investigation into mismanagement at Gucci is expected March 8. LVMH is seeking the inquiry and, ultimately, wants the court to annul the Gucci-PPR alliance. PPR emerged as Gucci’s white knight in 1999’s hostile takeover attempt by LVMH. The groups have been wrangling in and out of court ever since.
As for PPR’s Internet strategy, Weinberg said the group would continue to develop a “click and mortar” strategy.
Weinberg said Internet sales in 2000 increased more than five times to $27.4 million and forecast that PPR’s online activities would break even before 2003.
Asked if indications of a market slowdown in the U.S. posed a threat to growth, he expressed faith that PPR would continue to perform.
“Our capability to generate continued growth lies in our diversification,” he said. “It is our strength as a group, and will help us tackle economic challenges in the future.”