Bloomberg News

PPR Predicts 2013 Growth as Bottega Veneta Leads Luxury Boom

February 15, 2013

PPR SA, the French owner of Gucci, predicted another year of growth in 2013 amid an increasing focus on luxury goods and reported profit that beat estimates, lifting the shares to the highest price in more than 11 years.

The company expects to continue “significantly improving our operating and financial performances” this year, Paris- based PPR said today. Earnings in 2012 increased 19 percent, while sales advanced 21 percent.

PPR rose as much as 8.1 percent to 172.75 euros in Paris trading, the highest intraday price since July 2001 and leading advances in France’s CAC 40 Index. The company said it’s sticking to a goal to lift annual revenue to 24 billion euros ($32 billion) by 2020 even after its Puma SE sportswear unit said yesterday that reaching its 2015 sales target is no longer a priority.

“The beat was driven by the luxury division, which sustained strong sales momentum,” in particular at the Bottega Veneta brand, said Melanie Flouquet, an analyst at JPMorgan Chase & Co. with an overweight recommendation on the stock.

The shares were up 7.3 percent at 171.40 euros as of 12:13 a.m. The shares have climbed 20 percent this year.

PPR, which has acquired Chinese jeweler Qeelin in December and British fashion label Christopher Kane in January, said so- called recurring operating income rose to 1.79 billion euros in 2012, exceeding the 1.75 billion-euro average estimate of 10 analysts surveyed by Bloomberg. Sales rose to 9.74 billion euros, gaining 11 percent excluding acquisitions and exchange- rate movements.

Handbag Growth

PPR’s customer base will more than quadruple to 4 billion people in three years, CEO Pinault said at a presentation in Paris. “This is going to underpin growth in all of our brands in both divisions, making it possible to reach our targets,” he said, adding that PPR remains committed to Puma.

Puma yesterday shifted away from its target to reach 4 billion euros of revenue by 2015 and made improving profit a priority after earnings slid. Puma’s comments don’t change PPR’s ambition to reach its 2020 revenue goal, PPR Chief Financial Officer Jean-Marc Duplaix said today on a call with reporters.

“Once Puma is back on track for growth, we will seek to strengthen in particular the outdoor segment to build a portfolio,” Pinault also said.

PPR may raise prices on a case-by-case basis if currency fluctuations continue to penalize growth, Duplaix said.

Disposals

PPR’s sale of Redcats’s Cyrillus and Vertbaudet brands to Alpha Private Equity Fund 6 for 119 million euros should be finalized in the coming months, the company said. Talks have started to sell Redcats’s Nordic brands and that disposal should be completed in the first half of 2013, Duplaix said. PPR aims to sell La Redoute this year, probably in the second half of 2013, the CFO also said.

Fourth-quarter revenue climbed 18 percent on a reported basis, or 12 percent excluding acquisitions and currency swings, buoyed by demand for Bottega Veneta handbags, PPR said.

Luxury sales climbed 14 percent in the quarter on a comparable basis. Sales advanced 8.2 percent at Gucci, 33 percent at Bottega Veneta, 13 percent at Yves Saint Laurent and 20 percent at other brands including Stella McCartney.

“Gucci is not very impressive,” Thomas Mesmin, an analyst at Credit Agricole Cheuvreux, wrote in a note to investors.

The figures exclude online retailer Redcats and the Fnac media and consumer-electronics chain that PPR plans to dispose of as it focuses on luxury and sporting goods.

The company said its proposing a cash payment for the 2012 dividend of 3.75 euros a share, up 7 percent on the prior year. PPR also said it will distribute Fnac shares to investors.

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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