PPR disappoints as writedown hits results

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Pinault Printemps Redoute, the French retail conglomerate, disappointed investors on Thursday with lower than expected profits, unexpected write-downs and no update on its strategy for its Gucci luxury goods division.

First-half net profits rose 62 per cent to ?191m ($233m) largely on the back of a disposal of a further stake in consumer credit company Finaref. But they fell well short of analysts' expectations of about ?300m after the luxury goods business booked a restructuring charge of ?51m and depreciation of assets of ?148m.

PPR has moved rapidly in the past few years from a sprawling conglomerate with interests from timber to a car dealership to becoming a group increasingly dependent on its recently completed ?7.2bn acquisition of Gucci.

Robert Polet, the new chief executive of Gucci and former head of Unilever's frozen food division, said he would unveil his strategy in December.

Analysts said they expected more restructuring of Gucci's troublesome brands such as Yves Saint Laurent and Boucheron. ?Gucci is pivotal to the investment case for PPR,? said Geoff Ruddell, analyst at Deutsche Bank. ?We didn't learn much about the strategy so the December meeting is going to be extremely important.?

Another London-based analyst said: ?I think you will see some substantial goodwill write-downs and restructuring charges by the end of the year at Gucci.?

Analysts were also disappointed by a fall in underlying profits, with operating income declining 2 per cent to ?569m.

PPR intends to complete its transformation by selling Rexel, its electrical equipment business, possibly before the end of the year.

The group said operating profit at ?new PPR?, stripping out Rexel, rose 15 per cent to ?435m. Some analysts said the one bright spot was the strength of sales of its general retail business, which includes the Fnac music store and Conforama DIY shops, in France.

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