Luxury firm's profit jumps 35%

PPR SA, the owner of Gucci Group, said 2007 profit rose 35 percent on increased sales of Bottega Veneta handbags and the acquisition of a controlling stake in the sportswear maker Puma AG.

Net income climbed to 922 million euros, from 685 million euros in 2006, PPR said yesterday. That beat the 840 million-euro average estimate of 10 analysts compiled by Bloomberg. Sales gained 16 percent to 19.8 billion euros, the company said last month.

Chief Executive Officer Francois-Henri Pinault decided to buy two-thirds of Puma last year to stoke growth and agreed to sell cosmetics division YSL Beaute to improve profitability. Faster sales of Bottega Veneta and other luxury brands helped offset the effect of the dollar's 9.5 percent drop against the euro, which cut into revenue and profit from the United States and Japan.

"Bottega Veneta demonstrated its ability to deliver rapidly improving operating performance and continuing top line growth," Luca Solca, an analyst at Bernstein Research in London with an "outperform" recommendation on PPR stock, wrote in a Feb 22 note. "Gucci can play the key role, growing sales and earnings, building an eminently scaleable business."

PPR rose 2.17 euros, or 2.3 percent, to 95.49 euros on Tuesday in Paris trading. The shares have dropped 13 percent since the start of 2008 on concern the US may slip into recession.

Puma earnings

"PPR is confident in delivering another year of growth and improved financial performances in 2008, while pursuing its expansion in high-growth markets," Pinault said in the statement. The company will propose a 15 percent increase in the dividend to 3.45 euros a share, payable on June 16.

PPR gets about 10 percent of sales from the US, where concern that a slowdown in consumer spending may worsen increased after jeweler Tiffany & Co reported lower Christmas sales.

Net income from continuing operations excluding non-current items rose 27 percent to 904 million euros, the owner of France's Conforama furniture chain and Fnac book and electronics stores said in the statement.

PPR spent 3.33 billion euros last year to buy almost two- thirds of Puma, adding a global brand that straddles sports and fashion with potential for expansion in mature and developing markets.

Puma, which sells sneakers designed by Alexander McQueen, said on Tuesday that fourth-quarter profit rose 17 percent after new sneaker models and accessories fueled sales growth in Europe and Asia. Sales rose 4.8 percent to 504.4 million euros.

PPR, whose fashion brands include Yves Saint Laurent and Balenciaga, plans to increase the number of Puma outlets and boost the brand in developing markets. Excluding Puma, the group's share of net income from continuing operations rose 33 percent to nearly 1 billion euros, according to the statement.

So-called recurring operating income rose 29 percent at Gucci group, led by a 69 percent increase at Bottega Veneta on purchases of handbags and a 35 percent rise at Yves Saint Laurent on suit sales.

Agencies

(China Daily 02/28/2008 page16)