PPR First-Quarter Sales Trail Estimates as Gucci Slows

PPR SA (PP) reported first-quarter revenue that trailed analysts’ estimates as Gucci posted its weakest quarterly growth in more than three years amid a more volatile business climate in Europe.

Sales from continuing operations climbed 1 percent to 2.37 billion euros ($3.1 billion), the Paris-based company said today in a statement after markets closed. Analysts predicted 2.41 billion euros, according to the average of four estimates compiled by Bloomberg. Excluding acquisitions and currency fluctuations, revenue rose 3.1 percent.

Comparable sales at Gucci advanced 4 percent, the weakest increase since the fourth quarter of 2009. That missed the 6 percent median estimate of 13 analysts. The brand’s performance in Asia Pacific was mixed in the period, PPR said.

“PPR luxury numbers disappoint,” said Luca Solca, an analyst at Exane BNP Paribas, by e-mail. “We were expecting better momentum on the back of marginally better space growth contribution and pricing mix.” Solca has an outperform rating, the equivalent of buy, on the stock.

PPR joins LVMH Moet Hennessy Louis Vuitton SA (MC) and Hermes International (RMS) SCA in reporting slowing sales. LVMH this month posted its weakest quarterly growth in fashion and leather-goods revenue since 2009, citing a decline in Japanese tourism and fewer store visitors in China. Conditions in Europe are more difficult and may remain so in the current quarter, PPR Chief Financial Officer Jean-Marc Duplaix said today on a call.

Remains ‘Confident’

PPR, which yesterday agreed to acquire Italian jeweler Pomellato, remains “confident” of improving its performance in the full year, it said in the statement.

The shares rose 0.5 percent to 178.50 euros in Paris trading today, bringing this year’s gain to 27 percent.

Sales at handbag maker Bottega Veneta grew 8.8 percent on a comparable basis, slowing from 33 percent in the year earlier period and the fourth quarter. Mixed performances in wholesale penalized strong growth in retail, PPR said. Saint Laurent sales gained 19 percent, while revenue from other luxury brands advanced 6.9 percent, PPR said.

Overall, first-quarter sales at the luxury division rose 6.4 percent on a comparable basis, about a third of the rate of the year earlier period. Sports-and-lifestyle revenue declined 2.5 percent, weighed down by a difficult textile and sporting- goods market, especially in western Europe, PPR said. Puma sales fell 2.3 percent.

The company didn’t report profit for the quarter.

PPR plans to spin off the Fnac media and electronics chain in June and sell online and mail-order retailer La Redoute in the second half of the year. To mark its transformation into a specialist in luxury products and sporting goods, the company will change its name to Kering, it said last month.

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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