UPDATE 2-PPR Q1 revenues rise on luxury division

Wed Apr 25, 2012 2:35pm EDT

* Q1 consolidated revenue up 15.4 percent

* Q1 Gucci unit sales up 12 percent

* Sees positive 2012 (Adds details on units, context on luxury market)

By Nina Sovich

PARIS, April 25 (Reuters) - French luxury and retail group PPR posted a rise in first-quarter revenue on Wednesday, helped by buoyant luxury sales, which offset sluggish growth at its retail outlet Fnac and sports and lifestyle company Puma.

The luxury division, which accounts for nearly half the company's sales and includes Gucci and Yves Saint Laurent, grew 17.8 percent stripping out acquisitions and currency fluctuations, due to strong growth in mainland China and tourist purchases in its U.S. and European stores.

However, French retailer Fnac, which sells movies, books and CDs, contracted slightly and Germany's Puma, of which PPR owns 80 percent, came in below analyst targets, helping drag down sales in the entire group.

PPR's group managing director Jean-Fran├žois Palus acknowledged in a conference call with journalists that Puma's performance had been "disappointing" but he said that PPR was putting focus on design and new management to turn around the brand.

He also vigorously shot down rumors that PPR was looking to sell Puma to a private equity investor.

"We are not used to commenting on market rumours ... but this rumor that we would sell Puma for 8 billion euros is completely ludicrous."

LUXURY IS UP

PPR is in the midst of a transformation from a luxury and retail company into one anchored by a sports and lifestyle division that is meant to provide stability in times of economic flux.

To that end, PPR is in the midst of boosting its luxury division -- recently purchasing Italian menswear company Brioni -- and shedding retail operations such as online and catalogue retailer Redcats.

But the poor economy in Europe is making a sale of Redcats difficult. Last summer PPR pulled an auction because bidders were not meeting a reported threshold of 1.5 billion euros. PPR said Wednesday it continued to talk to potential buyers.

Fnac, where sales contracted 0.8 percent for the quarter, has long been a headache for PPR as consumers turn to the Internet to buy both music and books and unions resist a private equity buyer. No immediate sale is on the horizon.

In addition, competition for luxury goods companies has been intense. Last year PPR rival LVMH sealed a deal to buy Italian jeweler Bulgari for twenty eight times earnings before interest taxes, depreciation and amortization, a price many analysts found expensive.

LVMH, which is weighed almost entirely toward luxury, reported last week that overall sales on a like for like basis rose 14 percent for the quarter.

The long process of shedding the retail operations has also cast a question mark over PPR's strategy to focus on sports and lifestyle when luxury goods are booming.

This growth was due to strength in emerging markets, especially in greater China where sales at Gucci for the quarter rose 19 percent on mainland China on a constant basis.

Slower growth or outright losses in Italy, South Korea and Taiwan helped pull down overall sales for Gucci to 12 percent on a comparable basis. (Reporting by Nina Sovich; Editing by Lionel Laurent, Hans-Juergen Peters and Bernard Orr)

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