PARIS — Luxury continues to juice up PPR, the French owner of Gucci Group, which on Thursday said sales of high-end accessories and apparel drove its first-half profits ahead 27 percent.
While profits at the firm’s retail operations expanded a moderate 5.1 percent, PPR chairman François-Henri Pinault praised the “impressive” 69.6 percent leap in recurring operating income at Gucci Group in the six months through June 30 as among the best in the industry.
“Luxury has been exceptional,” said Pinault at an early morning meeting with analysts and reporters here. “The retail environment has been challenging.”
The numbers exceeded most analysts’ expectations and came a day after PPR rival LVMH Moët Hennessy Louis Vuitton reported its first-half profits leaped 46 percent, providing additional evidence that luxury continues to breeze forward.
Pinault predicted more smooth sailing on the horizon. He said that despite high comparisons, July and August luxury trading at the group was “extremely satisfying.”
He said numbers were in line with objectives and on par with gains logged in the first half.
“We remain confident for the second half of the year,” said Pinault.
As reported, PPR first-half sales gained 7.7 percent to 8.29 billion euros, or $10.19 billion, led by a 20 percent gain at Gucci Group. Retail sales gained 5 percent.
The Gucci brand, helmed by chief executive officer Mark Lee and designer Frida Giannini, remained the division’s cash cow. First-half profits at the Italian house spiked 39.8 percent to 267 million euros, or $328.3 million, lifted by high prices and stricter cost controls.
PPR finance director Jean-François Palus said all geographical zones, particularly the Asia-Pacific region, contributed to Gucci’s performance. He said leather goods, jewelry and ready-to-wear drove the brand’s blitz, and added that communication spending increased 31 percent in the period.
“There will be more intense communication and promotional action in the second half as we celebrate the house’s 85th anniversary,” he added.
Palus said 10 new Gucci stores, including a flagship in Tokyo, are scheduled to open in the second half.
The Tokyo unit, in Ginza, will be the first with a revamped store design set to be rolled out to all of Gucci’s 211 existing stores starting next year.
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Palus boasted that 11 of the 12 stores Gucci opened last year already are making a profit.
Another gem in the luxury stable was Bottega Veneta, which saw profits increase 8.6 times to 18 million euros, or $22.1 million, from 2 million euros last year.
Pinault said he envisioned the fast-growing house, known for its woven leather accessories, ultimately scoring 500 million euros ($637 million) or more in yearly sales.
With sales of 117 million euros, or $143.9 million, in the first half of the year, Bottega Veneta has eclipsed sales at the money-losing YSL business, for which Pinault has yet to set a breakeven target.
Palus said Bottega Veneta would open nine stores before yearend and bragged that 17 of the 18 stores opened last year already are profitable.
Losses narrowed 12.7 percent at YSL to 35 million euros, or $43 million, thanks to “accelerated growth” in leather goods and accessories and improved margins at directly owned stores.
Pinault said many of his luxury brands — Gucci, Bottega Veneta and Balenciaga included — would open more stores to maximize their potential, including a Balenciaga flagship in Milan next year. But he said YSL would concentrate on improving the performance of its existing stores. “Our priority is to improve [YSL] sales per square foot,” he said.
There were signs of improvement at the YSL Beauté beauty business, where losses dropped 66 percent to 5 million euros, or $6.1 million. Palus said restructuring at the division — including the sale of a production facility in Normandy, France — was nearing its end, and that a series of launches, including the new YSL men’s fragrance, L’Homme, should bolster business.
Losses at the so-called “other brands” also narrowed, improving 67.5 percent to 3 million euros, or $3.7 million, thanks in part to a tripling of profit at the hot Balenciaga brand and reduced losses at the Boucheron jewelry business.
Pinault shrugged off suggestions that any of the group’s lesser brands could be sold, saluting Stella McCartney and Alexander McQueen for being ahead of their breakeven plan. “Next year our ‘designer’ brands will be profitable,” Pinault said.
Pinault also said the group was open to strategic acquisitions, both in luxury and retail.
Just last week, PPR’s Redcats mail order division acquired U.S. cataloguer The Sportsman’s Guide Inc. in a deal that valued the company at $265 million.
Pinault expressed contentment about PPR’s recent unloading of a handful of low-margin retail businesses, including the Orcanta lingerie chain and the Printemps department stores, which in June was sold to a group of investors that includes La Rinascente president Maurizio Borletti.
He said PPR would continue to foster its retail businesses that can expand internationally.
In the retail division, operating income increased most (12.5 percent to 26 million euros, or $31.9 million) at the FNAC music and book chain. CFAO, an African trading business, saw profits increase 11.5 percent to 91 million euros, or $111.9 million, and profits increased 4.9 percent to 60 million euros, or $73.8 million, at the Conforama furniture chain.
Operating income slid 1 percent to 110 million euros, or $135.3 million, at the Redcats mail order arm.
PPR shares slipped 0.6 percent to 107.40 euros, or $132.06, in trading on the Paris Bourse.