Blog: Luxury groups show that class is permanent

Joe Ayling | 1 September 2008

PPR Group and Hermès Group demonstrated the continued resilience of luxury goods operators to slowing consumer markets last week by reporting strong first-half profit growth.

Fundamentally, both of the French firms are drawing strengths from having a healthy product mix and geographical spread, but notable performances from PPR's Gucci Group brands and Hermès silks and textiles division added some extra buoyancy to the respective figures.

At PPR, net income from continuing operations increased 17% to reach EUR344m (US$503.6m) during the first six months, helped by a 13% operating income rise at Gucci.

Gucci's performance was described by PPR as "very satisfactory", with handbag brand Bottega Veneta recording the strongest growth. Gucci Group's star-studded portfolio is also led by Gucci and Yves Saint Laurent, while emerging labels like Balenciaga, Alexander McQueen and Stella McCartney all show huge promise.

Therefore, despite widespread reports of cutbacks in discretionary spending caused by the credit crisis, fashion brand Gucci has managed to make the headlines under a PPR umbrella that also shelters brands selling books & CDs, electronics and cars.

François-Henri Pinault, chairman and CEO of PPR, seems supremely confident that the company's multi-format approach offers the flexibility to cope with testing times. "PPR has always been able to take advantage of periods of slower growth and the present case is no exception," he says.

Hermès, meanwhile, also has a relatively broad product assortment that includes silks & textiles, leather goods & saddlery and perfumes, and managed to boost net income by 5.3% to EUR134.9m in the first-half.

Its sales in France remained high, increasing 11%, while the rest of Europe rose 13%, the Americas rose 24%, and Asia outside Japan went up 22 %. In Japan, where the environment is less buoyant, Hermès sales edged up by 2% in the first half.

Hermès' silks & textiles division led growth with 17% sales growth, again showing that luxury goods firms are getting the most out of their fashion brands.

Therefore, it seems PPR and Hermès have bucked the current economic trend so far this year with the kind of 'je ne sais quoi' that only well-established luxury brands can bring to the table.

FRANCE: Gucci buoys interim earnings at PPR

FRANCE: Hermès in expansive mood after 5.3% H1 profit rise

By Joe Ayling, news editor.



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