PPR Sales Rise On Strong Luxury Growth, Puma Disappoints

04/25/2012| 02:59pm US/Eastern

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--PPR sales rise to EUR3.26 billion in the first quarter, lifted by strong growth in luxury

--Gucci on-year growth in the first three months of 2012 remained stable from the fourth quarter of 2011

--PPR says it has no plans to sell its sports brand Puma

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   By Nadya Masidlover 
   Of  
 

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.

Chief Executive Francois-Henri Pinault reiterated his previous guidance saying performance in the first quarter reinforced "confidence in PPR's ability to deliver another year of brisk revenue growth, combined with gains in operating and financial performance, in 2012."

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.

Business in the company's luxury division, home to its star Gucci brand as well as Bottega Veneta and Balenciaga, showed solid growth, up 18% on a like-for-like basis, as Gucci sales remained strong, up 12%.

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's LVMH Moet Hennessy Louis Vuitton SA (MC.FR, LVMUY) and the U.K.'s Burberry PLC (BRBY.LN, BURBY), have worried investors, with figures pointing to a slackening in the pace of the sector's growth since the beginning of the year.

The company's sport and lifestyle division showed weaker growth with sales increasing 2.8%, hurt by a weaker performance from Puma AG Rudolf Dassler Sport (>> Puma AG Rudolf Dassler Sport), the company's main sportswear brand, which posted a 3% rise in sales.

Despite the brand's "disappointing performance," Chief Financial Officer Jean-Marc Duplaix described recent reports PPR might sell Puma as "ludicrous".

"We do not have any intention whatsoever to divest from Puma," he said.

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 first quarter, Fnac reported a 0.8% drop in like-for-like sales as the euro-zone crisis continued to take its toll on consumer spending.

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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