PPR SA had a good year in 2011 and is confident of continuing the trend in 2012. Despite the uncertain economic climate the management is fairly certain that sales and earnings will increase in 2012. Gucci which is the biggest luxury goods brand in their luxury division looked very promising in the third quarter but slowed down relatively in the fourth quarter. The revenue growth for Gucci was only 12% compared to 21% in the previous quarter. The markets were expecting a growth of 15.5% from Gucci. The share prices of PPR dropped 3.3% to 120.4 Euros on the Paris stock exchange. , CA Cheuvreux analyst Thomas Mesmin has given an ‘underperform’ rating to the shares.
The luxury division of PPR has several brands apart from Gucci including Bottega Veneta and Balenciaga. The division registered a growth of 22% in the fourth quarter. Jean Francois Palus, the Deputy CEO of PPR was talking about the outlook for the current year. Despite the apparent slowdown in the fourth quarter of the last year he is very optimistic about Gucci’s potential in Asia. An upward revision in prices of luxury goods is expected this year. The division is expected to be at the forefront of the drive to expand the retail sale expansion.
The demand for high end luxury goods is getting stronger and PPR is going to expand its retail infrastructure. Gucci has plans for opening 43 stores this year. Bottega will also open 22 new stores where as Yves Saint Laurent will open 15 new stores this year. PPR is also on the lookout for other sports and lifestyle brands. It is part of their increased focus on luxury goods. They are aiming for mid-sized deals for acquisitions. The company has set itself a target of 24 billion euros of sales by 2020. They are looking to get 54% of their revenue from retail and 40% from sports and lifestyle, the company said in a presentation.
Francois-Henri Pinault, the CEO of PPR is confident that the core strengths of PPR will be able to sustain the growth momentum in the current year. Because of the renewed focus on the division the operating and financial performances are also expected to improve. The board of directors have decided to pay an unchanged dividend of 3.5 euros a share for 2011. The dividend will be payable on May 7. The restated 2010 accounts of the company has classified online retailer Redcats and the Italian unit of the Fnac electronics and media chain as discontinued operations and are scheduled to be sold probably in 2012.
PPR is in talks and consultation with several private-equity buyers for the sale of Redcats. The company is not going to reorganize the online retailer to facilitate the sales. The company is confident that it will get the right and reasonable price for the sale. There are industrial suitors in the field for Fnac Italy. In the meantime PPR is expanding its executive committee. Gucci CEO Patrizio di Marco, Bottega CEO Marco Bizzarri, Puma CEO Franz Koch and recently appointed Chief Financial Officer Jean- Marc Duplaix have been included in the newly expanded committee. It is hoped that the new committee will be capable of guiding the company to the targets that have been laid out for the medium term.
