PPR SA (PP) said it’s confident that sales and earnings will increase in 2012 amid an “uncertain economic climate,” even as revenue growth at the Gucci luxury goods brand slowed in the fourth quarter.
The shares fell the most since Nov. 1 after Gucci, PPR’s biggest luxury label, boosted sales less than its other brands. PPR dropped 3.3 percent to 120.4 euros in Paris trading.
Gucci was “slightly disappointing,” with comparable sales growth slowing to 12 percent in the fourth quarter compared to an expected 15.5 percent, CA Cheuvreux analyst Thomas Mesmin said in a note. He has an “underperform” rating on the shares. Gucci’s revenue gained 21 percent in the third quarter.
Total sales in the luxury division, which also includes Bottega Veneta and Balenciaga, rose 22 percent in the fourth quarter. Growth was slightly better than that in January, Jean- Francois Palus, the deputy chief executive officer, said on a call with reporters. PPR said it will raise prices for luxury goods this year and the unit will drive retail sales expansion. It’s “very optimistic” on Gucci’s potential in Asia.
Recurring operating income climbed 17 percent in 2011 to 1.6 billion euros ($2.1 billion), the Paris-based company said today in a statement. The average of five analysts’ estimates was for earnings of 1.54 billion euros, according to a Bloomberg survey. Sales rose 11 percent to 12.2 billion euros.
The market for high-end goods is showing a “strong dynamic,” Palus said, echoing comments by LVMH Moet Hennessy Louis Vuitton SA (MC), the world’s largest luxury maker, and Florence, Italy-based Salvatore Ferragamo SpA. Gucci will open 43 stores this year, Bottega will open 22 and Yves Saint Laurent will open 15.
PPR, which is reorganizing to focus on luxury goods and so- called sports and lifestyle brands, will make acquisitions in all those areas and is interested in “medium-sized” deals. Acquisitions account for a small percentage of its 2020 targets.
The company is aiming for 24 billion euros of sales by 2020, with 10 billion euros coming from Asia and more than 1 billion euros online. It’s seeking 54 percent of revenue from retail and 40 percent from sports and lifestyle, the company said in a presentation.
Sports and lifestyle brands will expand their product categories, Chief Executive Officer Francois-Henri Pinault said.
“In the uncertain economic climate of early 2012, the core strengths underpinning PPR’s robust 2011 results will continue to propel our performance this year,” Pinault said in a statement. “PPR is confident that 2012 will be another year of sustained revenue growth and improvements in our operating and financial performances.”
PPR said it will pay an unchanged dividend of 3.5 euros a share for 2011, payable on May 7. The company restated 2010 accounts last month to classify online retailer Redcats and the Italian unit of the Fnac electronics and media chain as “discontinued operations, sold or to be sold.” That’s a sign that disposals will probably occur in 2012 even if the assets continue to come under pressure, according to Antoine Belge, an analyst at HSBC.
The sale process for Redcats is continuing and PPR is in talks with several private-equity buyers for the unit, Palus said on a call with reporters. The suitors are working on financing and the company said it will ensure it gets the “right price” for Redcats. It doesn’t plan to break up the business for a sale.
Potential acquirers for Fnac Italy are industrial, with no private-equity interest in the business, he said.
PPR is widening its executive committee to include Gucci CEO Patrizio di Marco, Bottega CEO Marco Bizzarri, Puma CEO Franz Koch and recently appointed Chief Financial Officer Jean- Marc Duplaix, Palus said. The move will enable the company to be more integrated and closer to its brands, he said.
PPR also named Belen Essioux Trujillo as senior vice president in charge of human resources and a member of the executive committee. She was previously director of human resources in the leather goods and saddlery division and Hermes Sellier. The company said it’s seeking gender parity in group leadership by 2020.
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