PPR EYES $15 BILLION IN LUXURY-RETAIL AREA AS IT POSTS SOLID YEAR

Byline: Katherine Weisman

PARIS — Despite the purchase of high-profile luxury products, Pinault-Printemps-Redoute isn’t being allowed the luxury of resting on its laurels.
Even as PPR made major inroads in the luxury market — most notably the Gucci investment — and in e-commerce in 1999, PPR chairman Serge Weinberg told a press conference here Tuesday that the company is planning double-digit growth in both segments of the business as well as additional acquisitions. Weinberg said sales for the luxury and retail divisions, about $10 billion last year, should exceed $14.9 billion by 2002. The company’s overall growth rate is expected to be similar, which would put 2002 revenues close to $25 billion, encompassing all its business-to-business operations, like office supplies and construction materials.
“We are looking for other opportunities in the luxury sector, where we want to be a pertinent and profitable player,” he said, noting that last year’s 42 percent stake in Gucci and Gucci’s subsequent purchases of Sanofi Beaute and Sergio Rossi make PPR the world’s third largest luxury group.
Weinberg disclosed that 1999 net profits increased 23.2 percent to $612.5 million as operating income rose the same amount to $1.2 billion. Dollar amounts are converted from the French franc at current exchange rates.
Only a few years ago known principally as the operator of Printemps department stores and other retail properties, PPR, through the acquisition of high-end properties and expansion of its considerable e-commerce holdings, saw its consolidated sales increase 14.5 percent last year to about $18.5 billion.
Gucci sales, however, were consolidated only from February through the end of October, for a total of $776.1 million. This doesn’t include the Sanofi Beaute purchase, which was completed in December.
“Our investment in Gucci was well-timed,” Weinberg said, referring in part to the recovery in Asia, which represents one-third of Gucci’s sales.
He was enthusiastic about growth prospects at Gucci, noting that the luxury house enjoyed progressive sales growth during each of its first three quarters, finishing the third quarter ended Oct. 31, 1990 with a 20.9 percent increase. Jewelry and ready-to-wear were key growth areas for the upscale brand, for which jewelry accounts for nearly 3 percent of sales, while rtw represents 14.8 percent.
On a pro forma basis, including Sanofi Beaute and Sergio Rossi, PPR’s luxury division had sales of over $1.6 billion. Yves Saint Laurent fashion had sales of $88 million last year, while its beauty business brought in $594 million, PPR said in a statement. Sergio Rossi had sales of $59.9 million.
Commenting on the restructuring of the Yves Saint Laurent businesses, Weinberg said that licenses for Yves Saint Laurent products will either be discontinued or bought back. He cited the acquisition this year of Mendes, the couture house’s longtime rtw license partner, as an example.
Pressed for details on the restructuring of Yves Saint Laurent, he deferred to Domenico De Sole, president and chief executive of Gucci Group, as its chief spokesman. The Yves Saint Laurent rtw and beauty businesses now are part of the Gucci organizational structure. Further details are expected when Gucci presents its fiscal 1999 results on March 22.
PPR didn’t disclose sales of companies within Sanofi Beaute, a group with holdings including the fragrance licenses for Fendi, Krizia and Van Cleef & Arpels.
Weinberg said he expects PPR’s e-commerce sales to surpass $100 million this year after quintupling to roughly $38 million last year. For the first two months of 2000, e-commerce revenues totaled about $15 million.
But the division is expected to continue to post operating losses, which totaled $14.3 million last year.
With 45 Web sites in France and abroad linked to PPR’s existing retail companies, the firm considers itself an Internet pioneer. Weinberg firmly believes the company, a brick-and-mortar retailer with vast mail order operations led by France’s number-one catalog, Redoute, is better positioned to quickly and profitably expand e-sales than are the embryonic industry’s pure players.
PPR named Francois-Henri Pinault, the son of Francois Pinault and the executive previously in charge of Fnac, the multimedia, book and music retailer, as deputy chief executive officer to accelerate e-commerce growth.
According to the Benchmark Group, PPR’s sites for Fnac and Redoute rank among the top five e-commerce sites in France. Citing a study by Boston Consulting Group, Weinberg said these and other sites give PPR roughly 40 percent of the market for online books and 25 percent of the market for apparel and textiles in France.
PPR’s e-commerce activities, in addition to its current retail operations, are expected to greatly benefit from the financial services arm of PPR as well as from the client data banks of PPR’s store and catalog retailers, Weinberg said. He noted that Redoute alone has 20 million names on its database in France and an additional five million from its ownership of Brylane in the U.S. The Finaref credit card division boasts eight million cardholders. The group wants to better manage these databases, not only to improve sales, but to gain a stronger knowledge of PPR’s consumer business clients.
PPR is still investing heavily in its existing traditional retail and distribution businesses. Last year, the group invested $522.4 million in innovation, logistics and information systems. Excluding Gucci, PPR invested $1.3 billion in various acquisitions, including completing a 100 percent purchase of American mail order group Brylane for $194 million.
Looking ahead, the group expects to benefit from sustained demand in its markets. In the first two months of this year, sales increased 23.4 percent. Retail divisions will add 833,000 square feet of selling space.

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