PPR sees Gucci sales jump 42% in China

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PPR sees Gucci sales jump 42% in China
http://www.ft.com/cms/s/0/d73c7a06-fe83-11dd-b19a-000077b07658.html

By Ben Hall in Paris
Published: February 19 2009 13:57 | Last updated: February 19 2009 13:57

PPR on Thursday insisted it would stick to its strategy of combining luxury goods and mass market retail despite falling sales at its high street outlets in the last three months of 2008.

The French group reported flat net profit from recurring operations of €924m in 2008, up 0.2 per cent on the previous year, with luxury brands, CFAO, its African automotive and pharmaceutical arm, and cost-cutting helping to mitigate the impact of the consumer slowdown.

Revenue in the fourth quarter was flat at €5.68bn, depressed by retail chains FNAC and Conforama and its mail order division, and much slower growth in its luxury brands, which include Gucci, Yves Saint Laurent and Bottega Veneta.

But PPR’s shares rose by as much as 5 per cent in mid-morning trading with analysts reassured that the company had limited potential losses in vulnerable markets.

PPR has announced 1,200 job losses at Conforama, a homeware retailer, and FNAC, the entertainment store, as it steps up its efforts to cut costs as Europe sinks into recession.

Unlike LVMH or Richemont which have focused almost entirely on luxury, PPR has diversified into mass-market brands, acquiring 70 per cent of Puma, the sportswear group. But the mass-market brands have so far proved more susceptible to the downturn than luxury.

François-Henri Pinault said disposals and acquisitions were “off the agenda”. “We’re not going to change our brand strategy because of this crisis,” he added.

He declined to give a market prediction for 2009, but said January had been “satisfactory”.

Luxury goods sales grew by 8.1 per cent on a comparable basis in 2008. Gucci, the flagship brand, was weighed down by continuing problems with its watches division and by the sharp recession in Japan.

Mr Pinault said that strong growth in Gucci’s sales in China and Hong Kong, where it now has 33 shops, were offsetting its “big difficulties” in Japan. Gucci revenues in China grew by 42 per cent in 2008, or at an annual rate of 28 per cent in the fourth quarter.

PPR provided some added reassurance to the markets by cutting its net debt to from €6.1bn in 2007 to €5.5bn last year.

In view of flagging sales in the last three months of 2008 and the prospect of a difficult 2009, it cut its dividend to €3.30, down by 4.3 per cent on 2007.

Copyright The Financial Times Limited 2009

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