PPR sales up despite currency fluctuations

By Simon Pitman

- Last updated on GMT

PPR Group has reported strong results for 2007 despite negative
effects of the weakening of the yen and the dollar that negatively
impacted the luxury goods division.

The company is now looking to the emerging markets, in particular China, to boost future sales. Increase in sales ​ The France-based company that holds the Gucci Group luxury brands, Puma, and FNAC amongst other businesses has reported a 16 per cent increase in sales, with 2007 revenue of €19.76bn. Recurring operating income for the year was €1.70bn, an increase of 32.9 per cent on last year's figure. Within the company's luxury goods division, sales increased by 8.5 per cent to reach €3.87bn and recurring operating income by 29.3 per cent to reach €730.9m. Particularly positive results were seen from Bottega Veneta with an increase in recurring operating income of 68 per cent, and Yves Saint Laurent Beauté which doubled its recurring operating income. L'Oreal deal may speed up YSL profitability ​ PPR has recently penned a deal with L'Oreal regarding the YSL Beauté brand which would give the cosmetics giant a license to the brand and selected other fragrances in the portfolio. The royalties from the pending transaction may help the YSL brand to break even - the brand reported losses of €31.9m in 2007 in comparison to last year's losses of €49.4m. "The question [of the break even date of YSL] has haunted me since 2004,"​ said PPR chief executive Robert Polet. Polet refused to predict the profitability of the brand, saying that this would be the fourth year running he would be unable to say when the brand will break even. However, he did say that the royalties from the pending L'Oreal deal would 'significantly help to achieve the break even point in the YSL brand, quicker than we had thought a year ago'. China to offset sluggish Japan ​ According to the company, exchange fluctuations had a negative impact on the activity of the luxury division, particularly the depreciation of the yen and the dollar. The weakening of the yen affected both domestic sales in Japan as well as the number and purchasing power of Japanese tourists, stated the company. However, the company believe that these somewhat sluggish luxury markets will be offset by other emerging markets, in particular China. In China the company's Gucci brand has an unparalleled position, according to company CEO Francois-Henri Pinault. The Chinese clientele love the Gucci brands, responding well to novelty, creativity and innovation, unlike the Japanese, he added. Furthermore, the company noted that the drop in Japanese tourists and purchasing power was in part offset by a new tourist clientele from China, Eastern Europe and the Middle East. The group is predicting positive results in 2008 despite the current economic climate and states that it has multiple strategies to be put in place that will increase growth margins.

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