PPR Profit Beats Estimates on Luxury Sales

PPR (PP) SA, the French owner of the Gucci luxury brand and online fashion retailer Redcats, reported first-half profit that beat analysts’ estimates and said it expects to achieve better results this year than last.

Net income climbed to 450 million euros ($645 million) from 388 million euros a year earlier, the Paris-based company said today in a statement. The average estimate of seven analysts compiled by Bloomberg was 438.7 million euros.

Profit was boosted by a 23 percent rise in sales at PPR’s luxury division as demand in China surged. The French company, which sold furniture retailer Conforama in March, has started work on the sale of Redcats as it reorganizes to focus on luxury goods, as well as sports and lifestyle brands. Rival LVMH Moet Hennessy Louis Vuitton SA (MC) said this week it sees no sign of a slowdown in demand for costly handbags and watches.

At PPR, there was a “sharp acceleration in luxury trends, one of the best performance in the sector” said Thomas Chauvet, an analyst at Citigroup. “Significantly, the high-margin brands of Gucci and Bottega Veneta performed well.”

First-half sales from continuing operations climbed 7.3 percent to 7.22 billion euros, PPR said. Bottega Veneta sales advanced 29 percent in the first half, while Gucci rose 21 percent. Sales at Fnac dropped 2.7 percent, while Redcats posted a 1.3 percent decline.

PPR shares fell 85 cents, or 0.7 percent, to 129 euros, bringing the year’s advance to 8.4 percent. Stocks in Europe declined as U.S. lawmakers called off a vote on a Republican plan for raising the debt limit.

Higher Performance

“I am confident that in the second half of the year we will be able to deliver sustained revenue growth and achieve an higher full-year financial performance than in 2010,” PPR Chief Executive Officer Francois-Henri Pinault said in the statement.

The company, which agreed to purchase Volcom Inc. this year to expand in skateboarding gear, is focused on organic growth, Chief Financial Officer Jean-Francois Palus said on a conference call today. Sales at its Puma unit advanced 11 percent in the first half.

Recurring operating income was 749 million euros, higher than the 733 million euros estimated by Chauvet.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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