PPR Sales Rise On Strong Luxury Growth

04/25/2012| 12:29pm US/Eastern

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By Nadya Masidlover

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French luxury-to-retail company PPR SA (>> PPR) Wednesday said it expected another good year, after its first-quarter sales beat expectations, driven by strong demand for luxury goods while the company's sport and lifestyle division showed more modest growth.

The company's performance in the first quarter "reinforces our confidence in PPR's ability to deliver another year of brisk revenue growth, combined with gains in operating and financial performance, in 2012," said Chief Executive Francois-Henri Pinault, in a statement.

Sales for the first quarter rose 15% to EUR3.26 billion on a pro-forma basis, that strips out contributions from its Redcats catalogue business and Fnac retail unit in Italy, which are up for sale. The figure was above analyst expectations of EUR3.15 billion.

Revenue, which increased 7.9% on a like-for-like basis, excluding currency variations and acquisitions, was further boosted by Italian suit maker Brioni, which PPR bought in 2011.

The company's luxury division, home to its star Gucci brand as well as Bottega Veneta and Balenciaga, rose 18% on a like-for-like basis to EUR1.46 billion, with a 12% increase in Gucci sales.

In the fourth quarter of 2011, a slow-down in all-important Gucci division's growth to 12% on year in like-for-like terms, from 21% in the previous quarter, had already raised concerns among investors.

Recent sales updates from other luxury companies, including France-based LVMH Moet Hennessy Louis Vuitton SA (>> LVMH) and U.K.-based Burberry PLC (>> Burberry Group plc), have worries investor, with figures pointing to a slackening in the pace of the sector's growth since the beginning of the year.

Puma AG Rudolf Dassler Sport (>> Puma AG Rudolf Dassler Sport), the company's main sportswear brand, posted sales up 3% on a like-for-like basis from the same period of 2011.

The company said that Puma's "performance in mature markets was disappointing, with sales in Western Europe down 4% and North America reporting 4% growth, both regions being held back by sluggish sales in the Footwear category."

Retail chain Fnac reported a 0.8% drop in like-for-like sales as the euro-zone crisis continues to take its toll on consumer spending.

PPR is in the process of shedding its retail assets in order to focus its business on luxury and sports-type brands. Along with Redcats, which the company has already excluded from its financial releases, PPR hopes to sell the home-electronics chain Fnac, which comprised about one third of the company's revenue last year.

Over the past six months, PPR shares have outpaced France's CAC-40, rising close to 8%, while the benchmark index has risen around 2%.

PPR shares closed at EUR119.7 Wednesday.

-By Nadya Masidlover, Dow Jones Newswires; +33 1 4017 1754; nadya.masidlover@dowjones.com

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