PPR upbeat on 2008 despite U.S. slowdown

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By Nick Antonovics and Pascale Denis

PARIS, Jan 9 (Reuters) - France's PPR (PRTP.PA) expects much better 2007 results and further gains in 2008 despite a U.S. slowdown and recent downbeat comments from British chain stores, Chief Executive Francois-Henri Pinault said on Wednesday.

In an interview with Reuters, Pinault said financial markets had reacted "irrationally" to gloom elsewhere by marking down PPR shares, which have dropped 15 percent since Jan. 1 and are now 34 percent below a high of 141.5 euros set Oct. 8 last year.

PPR, one of Europe's largest non-food retailers, owns luxury Gucci Group, sportswear maker Puma (PUMG.DE), books and electronics chain Fnac and furniture group Conforama.

"We are at a level that no longer bears any rational relationship to the reality of our performance in 2007, which was good and significantly good, and the outlook for 2008, when we will further improve our performance," Pinault said.

He reaffirmed that PPR, which ranks third in luxury behind LVMH (LVMH.PA) and Richemont (CFR.VX), expects a "significant improvement" in 2007 profits.

"Contrary to financial markets, we are relaxed about 2008," Pinault added.

He declined to be more specific about Christmas sales ahead of the company's Jan. 24 trading update.

Pinault said the group as a whole and its distance selling arm, Redcats, which operates La Redoute catalogue business in Europe, was not in danger from a U.S. slowdown.

"The slowdown in the American economy will have an impact but will not call into question an improvement in performance of the group in 2008," Pinault said.

"Our distance selling businesses in the U.S. will grow in 2008," he said, noting its catalogues were specialised in sectors such as oversize clothing and outdoor sports that were in good health.

"In luxury, the drop in the dollar has not had a significant impact on our performance and has in contrast led to a significant rise in tourist flows that have profited the sector," Pinault said, citing record business over Thanksgiving.

He said the global luxury market should grow around 7 percent, but Gucci Group would - as in recent years - outperform the market, thanks to a steady programme of store openings.

Redcats makes less than a third of its sales in the United States while the Gucci Group makes 20 percent of sales in North America.

YSL BEAUTY DEAL NOT RULED OUT

Puma's business was likely to be boosted by four major sporting events, he said, citing the African Nations Cup and Volvo Ocean race, both of which Puma is sponsoring, and the European soccer championships and the Olympic Games.

He said the group had no plans to turn its back on its strategy of maintaining broader retail activities to focus on its faster growing and more profitable luxury brands, which include Italian fashion houses Gucci and Bottega Veneta and jeweller Boucheron.

PPR's African trading business CFAO remained very profitable and had a record year in 2007, he said.

He said, however, PPR would never shy away from exiting businesses whose further development would drain resources.

PPR faced a flurry of speculation last year that it could merge its small YSL Beaute cosmetics arm with bigger French rival Clarins CLRP.PA. Pinault said the group never commented on the rumours because there was no need.

But he did not rule out a deal involving YSL Beaute and another cosmetics group at some stage, noting it was harder for smaller players to survive without attaining a critical mass.

"I think we have the potential to develop organically. If we want to really grow the business, that will happen perhaps via a change in the perimeter. But the main thing is to develop this category of products, because it has very beneficial effects on the ready-to-wear and accessory businesses," he said.

(Editing by David Cowell)

((nicholas.antonovics@reuters.com; +33149495182; Reuters messaging: nicholas.antonovics.reuters.com@reuters.net)) Keywords: PPR/

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