PPR’s operating profit jumped by 40 percent to €630.3 million in the first half of this year, lifting its operating margin by 1.4 percentage points to 6.8 percent, but Puma, the German sports fashion brand acquired by PPR at 62.1 percent earlier this year, contributed less than Gucci and other luxury brands to this performance.
Without Puma, which was consolidated only for the 2nd quarter, PPR’s operating profit would have increased by 26.5 percent and its operating margin would have amounted to 6.5 percent. On the other hand, if Puma had been consolidated for the whole 6-month period, the group’s operating margin would have reached 7.7 percent.
PPR’s stock price surged as its net profit more than doubled to €326.4 million for the period, thanks in part to extraordinary gains related to the company’s previous disposal of the Printemps department store chain and of Kadéos, a gift distribution operation. Even without the addition of Puma in the 2nd quarter it would have climbed by 47.1 percent. PPR’s total sales grew by 11.4 percent to €9.240 billion for the first half, although the increase would have only reached 5.7 percent in constant currencies and without the consolidation of Puma.
As reported in the previous issue of Shoe Intelligence, PPR’s luxury goods business saw its sales rise to €1.773 billion, up by 9.2 percent in reported terms and by 14.8 percent in constant currencies. PPR now says that the operating margin of this business firmed up by 4.7 percentage points to deliver operating profit of €285.8 million, up by 54.9 percent. It would even have increased by 67.7 percent in constant currencies.
In spite of the unfavorable exchange fluctuations and pressure felt by Gucci in Japan, all regions contributed to the higher sales. Gucci’s sales in Japan grew by only 1.6 percent in the latest period, but PPR managers have pledged investments to upgrade the brand’s positioning in the country, which has taken a hit there due to disproportionate sales of entry-level price products and a price increase of about 20 percent over the last two years. Planned investments around the world include 8 store openings, 4 of them in China, and the relocation of Gucci’s flagship store in New York.
Footwear sales were particularly brisk for the Gucci brand on a global basis, rising during the 2nd quarter by 21.4 percent on a currency-neutral basis and by 15.5 percent to €70.9 million in euros. Footwear was singled out as a robust growth category for Yves Saint Laurent, whose sales jumped by 19 percent for the first half to €100.7 million, with an underlying increase of 27.9 percent at constant currencies and excluding revenues from royalties, which were affected by the termination of one licensing contract. YSL’s financial performance again improved, sharply reducing the brand’s losses in the first half.
Balenciaga footwear also deserved a special mention in the combined results of the Gucci Group’s other luxury brands, from Boucheron to Sergio Rossi, Alexander McQueen and Stella McCartney. Sergio Rossi considerably lifted its sales in Europe and Asia excluding Japan.
Other operations of PPR performed less well. In particular La Redoute and other mail order and internet retailing operations suffered declines of 4.6 percent in revenues and 10.7 percent in profits, due to the erratic weather conditions of the past few months.
PPR’s managers are particularly pleased that the acquisition of Puma, financed entirely through debt, has not deteriorated its credit rating. The buy of the 62.1 percent package ended up costing €3.283 billion, although a chunk of €1.519 billion disbursed for the acquisition of shares after the end of June will only appear in PPR’s accounts in the second half of the year. The public offering was closed on July 11, and the French company feels no urge to buy any more Puma shares for the time being.
Jochen Zeitz, Puma’s chief executive, has been appointed from the beginning of September as a member of PPR’s executive committee and as a non-voting member of its supervisory board.