PPR Annual Operating Profit Beats Estimates, Fueling Share Gain

PPR SA, owner of the Gucci luxury- goods brand and Conforama furniture stores, reported 2008 operating profit that beat analysts’ estimates, sending the shares up as much as 5.6 percent.

Earnings before interest and taxes increased 5.4 percent to 1.72 billion euros ($2.17 billion), Paris-based PPR said today, compared with the 1.71 billion-euro median analyst estimate. Net income was little changed and the company cut its annual dividend after sales stopped growing in the fourth quarter.

Economic growth in France, where PPR got about 38 percent of sales in the first half, shrank the most in at least 30 years in the fourth quarter as companies braced for recession by slashing investment and paring jobs. Revenue in the 175 billion- euro luxury goods industry may decline 3 percent to 7 percent this year, excluding currency swings, according to Bain & Co.

“PPR remains exposed to difficult markets such as specialized retailers like Conforama, and to luxury,” said Alexandre Iatrides, a fund manager at KBL Richelieu in Paris. “They’ve done a good job of limiting the losses in areas that the market was worried about.”

PPR rose 11 cents, or 0.3 percent, to 40.99 euros in Paris trading, after climbing as high as 43.19 euros.

Fourth-quarter sales were almost unchanged, less than the 5.8 percent annual increase to 10.2 billion euros, PPR said. Excluding acquisitions and exchange rates, revenue fell 1.5 percent in the fourth quarter and rose 2 percent for the year.

Dividend Cut

PPR cut the dividend to 3.30 euros a share from 3.45 euros, saying it intends to “maintain a balanced payout ratio.”

Net income increased to 924 million euros from 922 million euros in 2007, the company said. That missed the 1.21 billion median estimate of five analysts surveyed by Bloomberg News. Profit more than doubled in the first half, helped by gains of 421 million euros from selling YSL Beaute and Conforama Poland, which PPR treated as discontinued operations in today’s results.

“Having gauged the impact of the crisis early on, the group’s brands and companies implemented initial action plans that started yielding results in the second half of the year,” PPR Chairman and Chief Executive Officer Francois-Henri Pinault said in the statement. “In 2009, the group will intensify its action plans so as to build on its competitive advantages.”

PPR said yesterday it plans to save as much as 35 million euros by cutting costs at its Fnac music and book store unit in a reduction plan that could affect as many as 400 jobs.