France’s PPR said that the group’s lengthy transformation from a retail conglomerate to one focused on two core businesses of luxury and sports and lifestyle would be finished this year, as it reported a 28 per cent rise in 2012 net profit, driven by its luxury brands.
François-Henri Pinault, chairman and chief executive of the family-dominated group, which owns Gucci, Bottega Veneta and Puma, was upbeat on the outlook. The company, founded by his father, François Pinault, would “continue significantly improving our operating and financial performances in 2013,” he said.
However, the year will still be one of transition, as PPR sells off the remainder of Recats, its catalogue business, and spins off Fnac, the music and book retailer, in June. the group will also focus on improving the profitability of Puma, the German sportswear company that is the anchor of the sport and lifestyle division.
Puma’s new chief executive would be announced within several weeks, following the pending departure of Franz Koch.
Mr Pinault added he would not make acquisitions in the still-small sports and lifestyle business until the turnround at Puma was completed. This would be within the next 12-18 months, he estimated.
“Once Puma is back on track for growth, we will seek to strengthen in particular the outdoor segment to build a portfolio,” he said.
Net profit of €1.27bn was on sales 21 per cent higher at €9.7bn. Operating profit rose 19 per cent to €1.79bn.
The better than expected results in the dominant luxury business – accounting for 64 per cent of sales but 88 per cent of operating profits – boosted the shares, , which closed up 7.6 per cent at €172.00 on Friday in Paris.
There was a sharp contrast between the two main divisions, with operating profit in luxury up 28 per cent to €1.6bn, but down 2 per cent in sport and lifestyle to €305m.
Sentiment was buoyed by the 14 per cent like-for-like growth rate in luxury in the fourth quarter after fears that the sector might be slowing.
Gucci sales rose 8 per cent while those of Bottega Veneta were up 33 per cent. Yves Saint Laurent also posted a strong rise in sales of 13 per cent in the fourth quarter compared to the same three months in 2011.
Mr Pinault said that luxury sales in China had been stronger in the fourth quarter after a “moderate” slowdown in the third, but it was too soon to say whether the improved trend would be sustained.
Full year net profit at Puma, which accounts for 93 per cent of the sport and lifestyle unit’s sales, fell 70 per cent to €70.2m due to increased costs associated with its reorganisation.
Thomas Chauvet at Citigroup said: “The better than expected operational performance in luxury, and positive outlook comments will be partly offset by potential downgrades to Puma’s consensus 2013 earnings before interest and tax of €315m.”
The restructuring of PPR has come at a cost. It disclosed a net loss of almost €276m from discontinued operations last year, as the €194m operating profit of Fnac and Redcats – classified as discontinuing operations – was more than offset by asset impairments of €288m, mainly due to goodwill writedowns and restructuring charges of €149m.
The dividend is 7 per cent higher at €3.75 per share.