Kering Sees Very Significant Profit Drop on La Redoute, Puma
Kering SA (KER), the owner of Gucci, said it expects net income to drop “very significantly” this year because of costs related to its planned sale of mail-order unit La Redoute and one-time charges for the Puma brand.
Any “solution” for La Redoute “will have a significant impact on the net result from discontinued operations,” Paris-based Kering also said in a statement yesterday after the close of trading. Puma, the sporting-goods brand in which Kering is controlling shareholder, last week said it would book one-time charges of about 130 million euros ($175 million) this quarter.
The announcement “merely pulled together various already known and/or indicated elements relating to the disposal” of La Redoute and its impact on earnings, Allegra Perry, an analyst at Cantor Fitzgerald in London, said in a note.
The shares fell 0.6 percent to 162.25 euros at 10:32 a.m. in Paris trading, trimming this year’s gain to 17 percent.
Kering, formerly known as PPR, said its board met yesterday to discuss offers for La Redoute, which it has been seeking to sell since 2010 as it focuses on luxury and sports brands. The conclusion will be announced “soon,” it said. The sale and any possible job cuts have raised the ire of the French government, which is trying to reduce unemployment that has touched a 14-year high of 10.9 percent.
The divestment “has clearly been challenging and taken longer than expected,” said Perry, who maintained a buy recommendation on Kering stock.
La Redoute is the largest business of Redcats, the home-shopping unit that Kering is breaking up and selling. A fund owned by Swedish buyout firm Nordic Capital agreed in February to buy two Redcats brands, bringing proceeds from selling the division’s parts to more than $1 billion.
Puma SE Chief Executive Officer Bjoern Gulden last week pledged to make the company, Europe’s second-largest sporting-goods maker, more agile as it seeks to reconnect with consumers. The Puma charges related to the closing of a product development center in Vietnam and the transfer of personnel to Germany from the U.K.
Kering said all the charges and costs referred to are non-recurring and reiterated “its confidence in the solidity of its operating performance for the year 2013 as a whole, as well as its level of recurring net income.” The company reported net income of 1.05 billion euros in 2012.
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