| PARIS/FRANKFURT, June 18
PARIS/FRANKFURT, June 18 PPR seeks to
turn the page on its retail past and start a new life as a
luxury and sports brands group by renaming itself Kering at its
annual general meeting today.
Shareholders will be hoping the company, which bought German
sportswear maker Puma in 2007, will have credible ideas to turn
around the underperforming brand and replicate in sports the
success it has had in luxury.
Kering trades at a 15-20 percent discount to its luxury
goods peers, though it owns some of the market's strongest and
fastest-growing fashion brands such as Bottega Veneta, Yves
Saint Laurent and Stella McCartney on top of mega-brand Gucci.
"The share price of Kering today does not give much credit
to Puma's turnaround nor its capacity to contribute to group
profitability," said Caroline Reyl who runs several premium
brands funds totalling 1.6 billion euros and points out that 85
percent of Kering's profits come from luxury.
PPR waited until 2012 to oust Puma's old guard, putting its
operational No.2 Jean-Francois Palus in charge only in December.
"I have the feeling that PPR took a long time to get into
the business of Puma and really understand what was going on,"
said Thomas Chauvet, luxury goods analyst at Citi.
Investors have high expectations for Bjorn Gulden, the new
Puma CEO poached from Danish jeweller Pandora who starts on July
1, but the 47-year old former professional Norwegian footballer
inherits deepseated problems.
Puma has lost its competitive edge and credibility in key
areas such as the running shoe segment, allowing rivals such as
Asics and New Balance to gain market share and bigger
competitors such as Adidas and Nike to
consolidate their lead.
Puma's footwear sales dropped 7.8 percent in the first
quarter and sales fell 2.3 percent overall, prompting it to
downgrade guidance for sales and profit this year.
The results contrasted with those of Adidas, which reported
in May its highest gross profit margin ever amid strong sales of
higher priced products such as its Boost running shoes.
Puma has made a number of mis-steps in recent years,
including opening shops in the wrong places, poorly integrating
licence businesses and back-office operations and spending money
on unlikely sponsorships in sailing and rugby.
"The historic roots of Puma lie in soccer and are the heart
of the brand. We must reflect that more in our marketing,"
Pinault told a German newspaper last week, adding that Puma also
could have used Olympic sprinter Usain Bolt more effectively.
PPR bought Puma in cash for 330 euros a share in 2007. Now
Puma shares trade at 230 euros, and some say they be lower still
if Kering, which now owns about 83 percent, having started with
62.1 percent, was not buying.
PPR Chief Executive Francois-Henri Pinault staked his
reputation on the group's diversification into sports,
distancing himself from father Francois, who founded PPR and led
the group's investments in luxury goods in the early 2000s.
Puma's revised guidance gives the new CEO some breathing
space, so he won't have to worry about another warning in a few
"Gulden knows the market incredibly well, but he needs
time," said Klaus Jost, chairman of Intersport International,
the world's largest sportswear retailer and CEO of Intersport