* PPR officially changes its name to Kering
* CEO defends Fnac flotation
* Puma turnaround a big challenge
By Astrid Wendlandt and Victoria Bryan
PARIS/FRANKFURT, June 18 PPR turned
the page on its retail past and started a new life as a luxury
and sports brands group by renaming itself Kering at its annual
general meeting on Tuesday.
The company will now have to prove it can also change the
fortunes of Puma, its underperforming sportswear brand and
replicate in sports the success it has had in luxury goods.
Kering Chief Executive Francois-Henri Pinault said the new
name, which took a year to develop, was a necessity to reflect
the group's "new reality."
But beyond the name change and new logo featuring an owl,
Pinault gave few answers to shareholders about the future of
Puma or Fnac, the group's CD and book business, which will list
on the stock market on Thursday.
Pinault called on shareholders to hold on to Fnac shares
they will receive when the business floats, valuing Fnac at 400
million euros ($533.90 million), significantly below the 1
billion euro mark some analysts had forecast two years ago.
Fund managers and analysts have predicted that Fnac's share
price would fall once the stock started trading as investors
would offload their shares.
Pinault called on shareholders to hold on to the Fnac shares
they will receive in the float.
"This is an opportunity for investors to take part in the
turnaround of Fnac ... and I am confident in this company's
ability to pursue its development," Pinault said.
Pinault also said his family holding Artemis, Kering's
biggest shareholder, would hold on to its 39 percent stake in
Fnac for at least two years and a part of it beyond that.
NEW PUMA BOSS
Pinault said he had full faith in Puma's new chief executive
Bjorn Gulden, poached from Danish jeweller Pandora, who starts
on July 1. "He (Gulden) will bring a new energy and experience
which will help him tackle the challenges that await him,"
Klaus Jost, chairman of Intersport International, the
world's largest sportswear retailer and CEO of Intersport
Germany said Gulden knew the market incredibly well, but he
Gulden, a 47-year old former professional Norwegian
footballer who was previously head of accessories and apparel at
Adidas, has inherited some deep-seated 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 has made a number of mis-steps, including opening shops
in the wrong places, poorly integrating licence businesses and
back-office operations and spending money on sponsorships in
sailing and rugby not closely linked to the brand. It suffered a
70 percent drop in net profit last year.
"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.
DISCOUNT TO RIVALS
Pinault has 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.
"It would make sense to sell Puma but my fear is that
Pinault is keen to show the he can turn it around as it is his
baby," said Luca Solca, luxury goods analyst at Exane BNP
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, plus 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
brand funds totalling 1.6 billion euros. She pointed out that 85
percent of Kering's profits come from luxury.
Pinault also told shareholders that the group, whose
previous name PPR stood for Pinault-Printemps-La Redoute, was in
talks to sell the French mail order unit La Redoute by the end
of the year.
The disposal would close its exit from the retail industry,
begun with the disposal of department store Printemps in 2006.