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PPR Revenue Beats Estimates on Luxury Demand in Asia

PPR SA, the French owner of the Bottega Veneta luxury brand, said third-quarter sales rose 13 percent, beating analysts’ estimates, on increased demand for fashion and leather goods in Asia.

Revenue from continuing operations increased to 4.46 billion euros ($6.21 billion), from 3.95 billion euros a year earlier, Paris-based PPR said today in a statement after the market’s close. The average of six analysts’ estimates compiled by Bloomberg was 4.33 billion euros. Growth was 7.3 percent on a basis that excludes acquisitions, disposals and currency shifts.

PPR aims to sell its Fnac, Redcats and Conforama retailing businesses and use the proceeds to develop its Gucci Group luxury division and a new sports and lifestyle unit headed by Puma AG. PPR is working with banks to set up staple financing for its retail units, particularly Conforama, Chief Financial Officer Jean-Francois Palus said.

“When we are finished with this work, we will decide or not to process with the disposals,” Palus said on a conference call. “There’s nothing new right now.”

“We view the upcoming transformation of PPR into a ‘pure play’ luxury/lifestyle company as an attractive investment opportunity,” said Thomas Chauvet, an analyst at Citigroup Inc. in London, in an Oct. 18 note. He recommends buying the stock.

Each of PPR’s luxury brands increased sales at least 10 percent in the quarter, Chief Executive Officer Francois-Henri Pinault said in the statement. The third quarter increases the company’s confidence of a stronger full-year “operating and financial” performance, he said.

Emerging Markets

Gucci Group’s sales in emerging markets, including the Greater China region, rose 24 percent in the quarter. Overall, sales at the luxury unit climbed 27 percent. That exceeded LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, which posted a 26 percent gain in third-quarter sales at its fashion and leather goods unit.

Sales increased 26 percent at the Gucci brand and 42 percent at accessories label Bottega Veneta, PPR said. Revenue climbed 19 percent at Yves Saint Laurent. Gucci sales were very good in September “and this continues in October since the momentum is even higher,” Palus said.

In the coming months, Gucci is likely to raise prices by about 5 percent in Europe to reduce the difference with other countries, such as the U.S., China and Japan, where its products are more expensive, Palus said. Non-European tourist traffic is increasing and customers, particularly from China, are spending more, he added.

Luxury Sales

Sales of luxury goods may climb this year to the highest level since 2007, led by demand in China and a rebound in the U.S., according to an estimate from Bain & Co.

Sales rose 9.8 percent at Conforama and 8.4 percent at web and mail-order retailer Redcats, PPR said. Revenue advanced 4.3 percent at Fnac, fueled by a 23 percent gain in online sales. October sales at Fnac and Conforama have been “somewhat affected” by strikes in France, Palus said.

Sales at Puma, in which PPR holds a 71.6 percent stake, increased 17 percent, the Herzogenaurach, Germany-based company said Oct. 26. Revenue may grow “mid-to-high single digits” in 2010, the sporting-goods maker said at the time, raising a previous forecast.

PPR rose 85 cents, or 0.7 percent, to 118.55 euros in Paris trading today. The shares have risen 41 percent this year, giving the company a market value of 15 billion euros.

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