François-Henri Pinault, Chairman and CEO of PPR, commented: “PPR continued to grow in the second quarter, despite a difficult economic climate. Thanks to the talent and creativity of our teams, the Luxury business continued to advance at a remarkable pace. In Retail, we have consolidated our leadership positions in international markets, largely offsetting the weakness of the French market. The figures we are announcing today underscore the relevance of our strategic choices and of PPR's positioning in its two core businesses.”
In the second quarter, Group sales climbed to EUR 3,986.9 million, up 4% in
actual terms. On a comparable basis, revenue was up 2.7%.
Building on the momentum of the second quarter, Group sales for the first six
months of 2005 totalled EUR 8,094.4 million, up 4% on a comparable basis.
– The Retail division delivered a satisfactory second quarter with total sales of EUR 3,353.9 million, up 2.5% on an actual basis and up 0.2% on a comparable basis.
– In France, retail companies showed their resilience in a weak consumer spending environment. Sales were up 1.1% on an actual basis and down 2.7% on a comparable basis.
– Outside of France, revenues expanded at a steady pace %u2014 up 4.3% on an actual basis and up 3.9% on a comparable basis %u2014 driven by good performances from Fnac, Redcats and CFAO. By so doing, the Retail companies further demonstrated their ability to replicate their successful business models outside of France.
Conforama sales totalled EUR 655.2 million in the second quarter, reflecting an increase of 0.2% on an actual basis and a decline of 3.3% based on a comparable basis.
During the quarter, Conforama pressed ahead with efforts to renovate the store base. Three new stores were opened, one in France and two in Spain. In France, seven stores were refurbished to accommodate an expanded merchandise range and ensure more prominent display.
In France, sales were down 4.4% on a comparable basis, reflecting the combination of a difficult economic climate, lower average selling prices and to a lesser extent the store renovation program. Sales of white goods were up, but were unable to offset lower sales in the furniture segment, where the merchandise range is being revamped to better correspond to consumer demand. During the quarter, Conforama reinforced its positioning as a discount retailer. This strategy should enable the company to boost its brand image and benefit from any recovery in activity in 2005.
Internationally, revenues dipped 1.5% as a result of pricing pressure in most European countries. Sales in Italy were down 3.3%. Excluding Italy, sales outside France were up 0.7%, reflecting increased contributions from Spain (+22.9%) and Portugal (+2.4%).
In the second quarter, Fnac reported steady growth in revenues, which rose 5.2% on an actual basis and 0.4% on a comparable basis to EUR 892.6 million.
In France, Fnac store sales rose 1.8% on an actual basis but declined 2.6% on a comparable basis, due to lower average selling prices for technical products and to delayed launches of new books and CDs, which were postponed to the second half of the year. Sales of audio equipment rose by an outstanding 22.2%, thanks to strong consumer demand for MP3 players and accessories.
Fnac subsidiaries continued to report solid gains. Fnac Eveil & Jeux posted 5% sales growth while fnac.com recorded a 35.6% increase in sales, thus consolidating its French leadership in B2C e-commerce in terms of audience.
International expansion is a strategic growth priority for Fnac.
International operations reported strong sales growth during the quarter with comparable sales up 6.5%, led by Brazil and Spain, which posted double-digit sales increases. The company moved forward with expansion plans in Spain and Portugal, opening two new Fnac stores in the second quarter.
Sales declined by 4.1% on an actual basis and by 7.8% on a comparable basis to EUR 175.6 million during the quarter. This figure does not take into account sales from concessions, which were up 5.4% on an actual basis and up 1.6% on a comparable basis. Total merchandise sales (including concessions) were adversely affected by unfavourable summer sales dates in June. Women's wear sales grew 1.2% during the quarter.
Sports division sales were down in the second quarter as the athletic footwear market substantially declined on delays in the release of new collections (postponed to the second half of the year) and an absence of major international sporting events.
Redcats sales totalled EUR 1,114.4 million in the second quarter. In spite of the consumer spending slowdown in Europe, Redcats remained on a growth course, posting actual sales growth of 1.9% (excluding Sears) and comparable sales growth of 1%. In France, Redcats' home-shopping brands continued to gain market share despite experiencing a moderate 1.6% softening in sales.
Revenues were supported by a strong performance from the Children-Family division (+7.4%) and by the sales rebound at Senior brands (+3.1%) while La Redoute (-3.9%) proved resilient in a declining consumer spending environment.
Outside of France, comparable sales were up 1.9%. Revenues in Europe (+0.4%) were dampened by weak consumer demand and market weakness in Scandinavia and the United Kingdom. In the United States, Redcats continued its momentum in the second quarter with comparable sales growth of 6.5% (excluding Sears).
Redcats continued to experience rapid growth in online sales, posting a 35.8% increase in comparable terms to EUR 278.2 million during the quarter. E-commerce now accounts for around one-quarter of Redcats' revenues.
Sales at CFAO climbed to EUR 499.4 million in the second quarter, up 7.5% on an actual basis and up 8.1% on a comparable basis. All three of the company's activity sectors reported rapidly increasing sales, with the automotive business up 7.5%, pharmaceuticals up 10.8% and technology up 9.3%.
CFAO experienced significant differences in its performance by geographical area. Conditions remained extremely challenging in French-speaking Sub-Saharan Africa (particularly in Ivory Coast and Cameroon) while sales in Mediterranean Africa, which rose by 47.8% on a comparable basis, represented three-quarters of the growth recorded in the second quarter.
– Luxury Goods sales amounted to EUR 639.3 million in the second quarter, up 12.5% on an actual basis and up 17.6% on a comparable basis.
– Building on a very good first quarter performance, the Gucci and Bottega Veneta brands continued to grow dramatically, posting respective sales increases of 19% and 55.8%, while Boucheron and the designer brands maintained momentum and recorded significant sales growth.
– The outstanding performance in Luxury Goods was fuelled by strong sales increases across all main product categories. Sales of leather goods, which account for 39% of sales in the Luxury Goods division, climbed by 33.6%.
– The Luxury Goods division experienced strong double-digit sales growth in all geographical areas, with the highest increases recorded in Asia-Pacific (+30.9%) and in North America (+22.1%).
– Sales through directly operated stores advanced by a very good 22.4%. Wholesale sales continued to accelerate, rising by 9.4% in the second quarter compared to an increase of 4.4% in the first quarter.
– Gucci Division
Gucci Division sales advanced 19% on a comparable basis to EUR 378.6 million. During the quarter, leather goods (+32.1%) made the largest contribution to sales. Highlights included the successes of Hasler, Pelham, Punch and Creole handbags and of carry-over lines such as Abbey and Eclipse.
By capitalising on the high quality of its products, its upscale market positioning and prominent advertising presence, the brand succeeded in maintaining its price points.
Gucci Division posted sales growth of more than 10% in all geographical regions, and accelerated its growth momentum in North America and Asia-Pacific.
– Bottega Veneta
Bottega Veneta continued to build on its first-quarter momentum, with sales up 55.8% on a comparable basis to EUR 32.6 million. Sales through directly operated stores climbed by 53.9% while wholesale sales rose 80.7%.
Thanks to the success of its most recent collections, the brand reported double-digit sales increases in virtually all product categories in the second quarter.
This excellent performance saw gains in all geographical areas: with Europe up 50.2%, Asia-Pacific up 97.8%, Japan up 45.5% and North America up 48.1%.
– Yves Saint Laurent
Yves Saint Laurent sales amounted to EUR 33.1 million, down 2.9% on a comparable basis, notably due to a disappointing performance in leather goods, which contrasted with 5.8% growth in ready-to-wear sales.
The company is confident that its new operational structure, including a newly appointed accessories designer, will provide renewed impetus for the brand's development.
– YSL Beauté
Revenues at YSL Beauté rose by 3.3% on a comparable basis. Sales of fragrances and cosmetics products marketed under the Yves Saint Laurent brand rose by 6.2%, driven by the success of the Cinéma
fragrance and of Rouge Pure Shine lipstick (launched in March 2005), as well as by strong sales of the Opium fragrance and of make-up lines.
Fragrances revenues rose 2.8%. Make-up sales climbed 9.6%, reflecting the success of the new summer 2005 range.
– Other brands
The other Luxury brands posted strong sales increases in the second quarter. Sales rose 45.8% on a comparable basis to EUR 64.9 million.
Sharpest gains were posted by Boucheron, Balenciaga and Alexander McQueen.
These results were supported by the launch of a raft of new initiatives in the quarter, which testify to the creativity and innovation of the design teams at these brands.
Alexander McQueen created the Novak handbag with the ambition of creating an icon, both timeless and instantly identifiable. Alexander McQueen has also teamed up with Puma to launch a new sports shoe line for men and women, to raise the profile of the brand.
Stella McCartney continues to pursue selective partnership opportunities and will design a women's collection for H&M, which will go on sale in autumn 2005.
Balenciaga posted spectacular sales growth in the second quarter, led by a 300% increase in leather goods sales.
Boucheron pressed ahead with efforts to reposition its business and in April opened its first store in Shanghai, which will spearhead its development in China. Initial response to the new haute joaillerie collection, launched in July, has been outstanding.