PPR May Advance After Gucci Maker Says Confident for 2012 Growth
PPR SA (PP) may rise in Paris trading after saying it’s confident of revenue and profit growth in 2012 and reporting a 16 percent gain in third-quarter sales, led by demand for luxury goods such as Gucci bags and Bottega Veneta wallets.
Revenue from continuing operations rose to 2.56 billion euros ($3.3 billion) from 2.2 billion euros a year earlier, Paris-based PPR said after markets closed yesterday. The average of six analysts’ estimates surveyed by Bloomberg was 2.57 billion euros. Growth was 6.6 percent excluding currency shifts as a 12 percent increase at the luxury unit outweighed a 1.2 percent decline at the sports and lifestyle division.
A 7 percent advance in comparable sales at Gucci, PPR’s largest brand by revenue, “was pretty reassuring,” said Thomas Mesmin, an analyst at CA Cheuvreux in Paris. “Also, it’s quite reassuring for” the fourth quarter, when the label plans to open more stores, he said. The analyst, who has an outperform rating on PPR shares, expects the market to react positively to PPR’s quarterly performance.
Luxury-goods companies are fighting for sales as some consumers rein in spending while others continue to splash out. British handbag maker Mulberry Group Plc (MUL) forecast an unexpected drop in full-year profit this week, while Burberry Group Plc (BRBY) said Sept. 11 that profit would be at the lower end of a range of estimates. Hermes International (RMS) SCA said last month it hadn’t yet been affected by the weakening global economy.
The gain in luxury revenue was “propelled by the momentum of our brands across all of the group’s regions,” Chief Executive Officer Francois-Henri Pinault said in a statement. Comparable sales rose 21 percent at Bottega Veneta, 27 percent at Yves Saint Laurent and 16 percent at other luxury brands.
Volcom Delivery Delays
The decline in revenue at PPR’s sports and lifestyle unit was caused partly by the Volcom surf- and skate-wear brand, where delivery delays hurt sales, PPR said. The impact on Volcom should be reversed in the fourth quarter, Chief Financial Officer Jean-Marc Duplaix said on a conference call yesterday. Puma sales were stable overall on a comparable basis, the company said.
Puma said this week that full-year profit will be “significantly below” 2011 because of one-time expenses as it cuts costs to combat a weakening consumer climate in Europe. The brand is closing stores, trimming product ranges and cutting jobs.
Sports & Lifestyle
The sports and lifestyle division’s weakness “is not a very good signal if you consider that most of the acquisitions to be made by PPR over the next five to 10 years should be on sports and lifestyle,” said CA Cheuvreux’s Mesmin. PPR bought Volcom last year.
PPR’s quarterly figures exclude online retailer Redcats and the Fnac media and consumer-electronics chain that the company plans to dispose of as it focuses on luxury and sporting goods. PPR earlier this month said it plans to spin off Fnac next year.
Talks regarding the sale of Redcats’s U.S. operations are “well advanced,” while discussions regarding the unit’s children’s and family brands have been “initiated,” PPR Group Managing Director Jean-Francois Palus said on the call. The information memorandums for Redcats’s Nordic brands are being finalized and the process will be triggered in the middle of November for completion in the first quarter, Palus said, adding that the process for La Redoute and the French brands will be triggered after that.
PPR may announce the sale of parts of Redcats before the end of the year, Duplaix said on a separate call to reporters. Completing the disposal of all of Redcats will take several months, he said.
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