financial
financial

Polet’s Debut for Gucci: CEO Lauds ‘Mini-Boom’ As Profits Climb 33%

PPR’s net income shot up 61.5 percent to 191.1 million euros, boosted by luxury goods, but was well shy of expectations of about 360 million euros.

Robert Polet

Robert Polet

Photo By Stephane Feugere

PARIS — Robert Polet has spent the last two months getting a crash course in luxury, Gucci style — and so far, the Dutchman likes what he sees.

The former Unilever frozen-foods honcho on Thursday delivered an upbeat assessment of his new job as Gucci Group’s chief executive, praising its brands, business fundamentals and entrepreneurial spirit, but stopping short of providing a strategic plan. He isn’t expected to table that until December.

“I’ve been around the world in 60 days,” said a relaxed and charismatic Polet at a gathering here to disclose Gucci parent Pinault-Printemps-Redoute’s first-half results. PPR’s net income shot up 61.5 percent to 191.1 million euros, or $234.7 million, boosted by luxury and the sale of noncore assets, but was well shy of consensus expectations of about 360 million euros, or $442 million. Dollar figures are at average exchange rates.

Earnings before interest and taxes of 569.2 million euros, or $698.9 million, down 2 percent, also fell short of market expectations. Shares in PPR fell 6 percent Thursday to close at 70.50 euros, or $85.70, in trading on the Paris Bourse.

As reported, PPR, whose far-flung interests span department stores to catalogues, saw first-half sales decline 7.4 percent to 11.37 billion euros, or $13.96 billion.

Gucci Group’s pro forma EBIT gained 33 percent to 150.4 million euros, or $184.7 million, in the half. Sales rose 4.4 percent to 1.34 billion euros, or $1.65 billion, from 1.28 billion euros, or $1.42 billion, in the corresponding period of 2003.

The Gucci brand saw EBIT gain 6.1 percent in the first half to 231.5 million euros, or $284.2 million. Losses narrowed to 35 million euros, or $42.9 million, at Gucci’s so-called “other” brands, including Balenciaga, Boucheron, Alexander McQueen and Stella McCartney.

Losses also dropped at Bottega Veneta, to 6.6 million euros, or $8.1 million, from 10.1 million euros, or $11.2 million.

PPR chief executive Serge Weinberg said losses at YSL had widened to 39 million euros, or $47.9 million, from 35 million euros, or $38.7 million, with 7 million euros, or $8.6 million, attributable to new store openings.
But Polet, giving his first public address since succeeding Domenico De Sole, owned the spotlight at the meeting.

“I’ve visited 163 stores,” Polet said, speaking in Dutch-accented English to a largely French audience gathered at a meeting room atop the Printemps department store. “I’ve visited about 100 of the competition’s stores, and I’ve met or spoken to about 2,500 people [who work at Gucci]. I’m not tired. I’m actually energized, because I like what I see.”

PPR did not break out sales for the Gucci Group in the quarter. But Polet reported robust Gucci sales from May to July, reflecting the upswing in the sector, which has been buoyed by the American and Asian markets.

He said there has been a “mini boom” in luxury spending in the U.S. and that Japanese consumers were spending in tourist destinations such as South Korea and Hawaii. Sales in the Asia Pacific region were thriving, he added.

From May to July, Gucci brand sales gained 16 percent, while YSL climbed 21.5 percent, Polet said. YSL Beauté grew 9.5 percent, and Bottega Veneta surged 77 percent. Overall, Gucci Group sales grew 15.5 percent in the three months.

By region, Gucci Group sales in Asia from May to July soared 30 percent, followed by 18.5 percent growth in the U.S. and 13 percent growth in Europe. Japan gained 6 percent.

Leather goods, Gucci’s biggest category, saw sales gain 22 percent, followed by 20.5 percent growth in watch sales, which Polet said “were on the up.” With those words, he flashed a new Gucci timepiece on his wrist.

Sales of ready-to-wear gained 14.5 percent, footwear increased 12.5 percent and fragrances and makeup grew 8 percent and 13.5 percent, respectively. The only category with declining sales was jewelry, which was hurt by restructuring at Boucheron.

Polet said sales of the first post-Tom Ford cruise collections by Gucci’s women’s wear designer Alessandra Facchinetti and Yves Saint Laurent’s Stefano Pilati, two of Ford’s underlings, had been good.

Pilati and Facchinetti make formal runway debuts in front of the international press within the next month.
Meanwhile, Polet showed a merchant’s sensibility when he lauded Gucci’s new store in Taipei as its most beautiful yet, asking members of the audience to stop by if they were in the neighborhood, “and please buy something.”

Gucci is scheduled to open stores in Berlin, Shanghai, Guam and Osaka in coming months, Polet said. Bottega Veneta also has stores slated to bow in Seoul, Taipei and Kuala Lumpur. Bottega’s new Fifth Avenue flagship will be feted with an event on Sept. 14.

Sharing some impressions of his whirlwind tour of the luxury giant, Polet recounted finding a Gucci ad from 1952 from Aldo Gucci’s days that illustrated that “already they were marketers and brand builders.” The caption from the campaign? “The quality is remembered long after the price is forgotten.”

He also said he was touched to meet a 47-year veteran of the company, who explained he continues to make shoes at Gucci’s Florence factory beyond his retirement years because “I love what I do. This is my life.”

But Polet acknowledged he still has much to learn. Gesturing toward his head, he quipped: “On all my hard disks, there are still a few blank spaces.”

Weinberg said Gucci would synchronize its financial calendar with PPR’s by the end of the year.

Weinberg did not detail why PPR missed consensus expectations of profits so significantly, but PPR indicated it resulted partially from a write-down of certain luxury goods assets totaling 147.7 million euros, or $181.4 million. He reported that retail was gaining ground in PPR’s key French market, which has suffered recently from weak consumer spending. He said first-half operating profit at the retail division gained 4.7 percent to 291.8 million euros, or $358.3 million, and that profits will continue to gain in the second half.

At Redcats, PPR’s catalogue division, Weinberg outlined plans to step up operations in the U.S., where a new managerial team has been in place since January. He said new catalogues and back-office improvements were in the works.
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