WSJ Update: Luxury sales increases
Gucci parent PPR SA (PP.FR) had reported about the strong luxury sales on Thursday. But its sport and lifestyle business is lifeless as the strictness measures across much of Europe continued to take their toll on shoppers’ budgets. PPR said its luxury division includes brands such as Yves Saint Laurent and Stella McCartney which had increased 11.9% on an organic basis to 1.59 billion euros, but the revenue allotted of the sportswear business dropped 1.2% on an organic basis to EUR969.7 million. As mass-market consumers cut back on purchases while wealthy shoppers continue to spend, PPR’s report emphasizes its challenge of delivering growth across its business segments. Overall revenue increased 6.6% excluding currency effects and acquisitions and asset disposals to EUR2.56 billion ($3.30 billion).
During the present years, the French company has moved to transform itself from a retail conglomerate whose activities included furniture stores in France and a distribution business in Africa to a much higher-end brand owner. Up till now, as the company reaches the last leg of a restructuring process, the challenging economic environment is thwarting its efforts to build up its sports and lifestyle brands. In July, Puma AG, PPR’s core athletics label had issued a profit warning citing a slowdown in European business. On Thursday it had been posted that the German brand had also been controlled by PPR since 2007, stable organic sales in the third quarter on-year. Though PPR Chief Financial Officer Jean-Marc Duplaix said that the business’ activity in Western Europe was “disappointing.” The other brands in the sport and lifestyle division including California surf and skate label Volcom acquired for $608 million in 2011 saw sales slide 13%. Mr. Marc Duplaix said that the fall resulted from delivery delays but also the “difficult environment in Europe which affected the [Volcom's] development.” PPR is not alone who is facing the difficulty with sports brands as directly exposed to spend-thrifty consumers on European high streets. The run of the world’s largest sporting goods maker, Nike Inc., is also slowing after two years of strong profits, with growth slowing in China and Europe.