Byline: Katherine Weisman

PARIS — The sex appeal of luxury and e-commerce will start translating into more meaningful business in the coming year, Serge Weinberg, chairman of Pinault-Printemps-Redoute, predicted at the company’s annual meeting Tuesday.
As sexy as it may be, the luxury industry accounted for only 4.2 percent of PPR’s sales last year. Another sexy business — e-commerce — accounted for just 0.2 percent but, like luxury, is a key part of the group’s activities. Last year, PPR earned $567.5 million on consolidated sales of $17.1 billion, as previously reported. (Dollar figures have been converted at current exchange.)
With Tuesday’s announcement that Gucci had bought French jeweler Boucheron and that Gucci-owned Yves Saint Laurent had bought back several license agreements, luxury was a hot topic for officers and shareholders of PPR, Gucci’s largest shareholder.
“Our entry into the luxury sector is a success,” Weinberg stated. “Gucci bought Yves Saint Laurent fashion and beauty and Sergio Rossi. And we are creating the world’s third largest luxury group around Gucci. These acquisitions give our luxury operations sales of $1.66 billion on a full-year basis.”
Until last March, PPR was a large distribution group with consumer retail operations and business-to-business companies. But last spring, PPR took 42 percent of Gucci with the goal of creating the world’s third luxury group.
Weinberg reiterated PPR’s goal to generate some $13.8 billion in sales from both the luxury sector and consumer retail businesses by 2002. Last year, PPR consolidated nine months of Gucci sales from Feb. 1 to Oct. 31 for a total of about $720 million. PPR’s consumer retail operations had full-year 1999 sales of $8.5 billion.
While this gap will be bridged in part by organic growth at existing luxury and retail operations, Weinberg emphasized that there would be more luxury acquisitions and that the group would also start exploiting synergies among its luxury brands.
Weinberg is convinced that his group’s internet strategy — growing click-and-mortar businesses from existing brick-and-mortar operations — is more valid than ever, so much so that PPR will achieve nearly $137 million in e-commerce sales by year end. This figure exceeds Weinberg’s original projections, issued in March, which were more in the $100 million ballpark and soars ahead of last year’s e-commerce sales of $34 million.
”The failure of some Internet sites reiterates the credibility of our strategy, which is an industrial approach rather than a financial one,” Weinberg told shareholders. He noted that developing e-commerce sites from internal operations took priority over acquisitions. “At the end of April, our e-commerce sales showed a 600 percent rate of growth,” he said.
At the end of last year, PPR had 45 internet sites up and running. These included e-commerce sites for most of the group’s stores and catalog operations such as the Fnac book, an audiovisual and electronics chain, or the preppy Cyrillus family apparel store chain and catalog. The company also launched a free access provider and portal Mageos.com and a family-oriented portal called Petitsetgrands.com.
Citing research from French Internet consultant Benchmark, Weinberg noted that the Web sites for Fnac and Redoute, PPR’s generalist catalog company and the largest mail order company in France, ranked among the top five sites favored by French Internet users.
“Redoute’s savoir-faire in terms of stocking and shipping inventory is being exploited by the whole group for the development of e-commerce,” Weinberg explained. And while PPR’s overall e-commerce will lose money for at least this year and next, an issue which concerned some shareholders present, Weinberg assured them that while some sites are losing money, several are profitable — including those of Redcats, the PPR division which groups all mail order operations — while others have hit break-even.
PPR’s foray into the new economy and the new sector of luxury isn’t stopping the group from expanding its traditional core businesses. Weinberg said that this year, the group will open nearly 890,000 square feet of new selling space among its different retailers. This compares with about 700,000 square feet added last year and roughly 220,000 square feet in both 1998 and 1997.