Luxury profitable for PPR

PPR continues to be driven by it luxury activities. The French owner of the Gucci Group has announced that although retail operations only grew a modest 5.1 percent, the Gucci Group saw its recurring operating income for the first half increase by 69.6 percent. “Luxury has been exceptional,� chief executive Francois-Henri Pinault told analysts and reporters. “The retail environment has been challenging.� He added that the company remains “confident for the second half of the year.�

PPR sales rose 7.7 percent to €8.29 billion during the first half, boosted by a 20 percent rise at Gucci Group. Retail sales increased 5 percent. The Gucci brand continued to generate the majority of profits in the luxury division, with a 39.8 percent gain to €267 million, thanks to higher prices and stricter cost controls. According to PPR finance director Jean-François Palus, all geographical zones – especially the Asia-Pacific region – contributed to Gucci’s growth. Leather goods, jewellery and ready-to-wear drove sales, while communication spending rose 31 percent in the first half. According to a spokeswoman, the company does not give more detailed information on product categories. Palus said that 10 new Gucci stores, including a Tokyo flagship, are in the pipeline for the second half. He also said that 11 of the 12 stores opened last year were already making a profit.

The Bottega Veneta brand was another strong performer in the group’s luxury division. Profits rose to €18 million, up from €2 million last year. Pinault said he believed the Italian brand, known for its woven leather goods, could eventually achieve sales of €500 million or more a year. Sales rose to €117 million for the first half and Palus said 17 of the 18 stores opened last year are already profitable. Meanwhile, YSL is still making and a breakeven target has yet to be set, although orders for the brand were up for the second half. Losses were diminished by 12.7 percent to €35 million, thanks to “accelerated growthâ€? in leather goods and accessories and improved margins at directly owned stores, where Pinault said the priority “to improve sales per square footâ€? lie. He said many of the luxury brands would open more stores to improve growth potential.

The smaller brands, including Balenciaga and the Boucheron jewellery business – which a PPR spokeswoman said are never analyzed as individual businesses – improved losses by 67.5 percent to €3 million. The improvement was the result in part of a tripling of profit at Balenciaga and reduced losses at Boucheron. Pinault put to rest the idea that the Stella McCartney and Alexander McQueen businesses were to be sold, stating that he expected them to be profitable next year. He added that the group entertained the possibility of strategic acquisitions, both in its retail and luxury divisions.

Leave a Reply

Your email address will not be published. Required fields are marked *