French holding PPR, which is running now Gucci, Yves Saint Laurent, Balenciaga and Alexander McQueen, by the official figures is reaching high growth demand this year in all countries and in all categories.
PPR has reason to be happy in the success of all brands within the group, at the developing markets, European and American markets.
The company has confirmed that they will be looking for assets to add to their jewellery division and looking to concentrate on their luxury portfolio, which is headed by Gucci now.
Having seen arch rival LVMH swoop for Bulgari, PPR is in talks to make one grosse acquisition in the luxury goods sector.
The newspaper La Tribune has announced an impressive list of potential targets: Hugo Boss, owned by European private equity firm Permina, which is valued at 4.4 billion euros, Burberry at the level of 6,8 billion euros, “could make sense” Ralph Lauren", and Armani “affordable”…
But the bomb shell came at the end of the article - “acquisition in the luxury goods sector... Prada, which today it would be valued at a whopping 8.85 billion euros.”
Unsurprisingly, the story has revived speculation that PPR might look to buy Burberry, which unlike many luxury goods companies, is not family-controlled and boasts a 100 per cent free float.
PPR are looking to sell their share of online retailer Redcats later this year. With the money from the sale, they will look at paying off some debts, if they will not see a potential acquisition, they will grab it.
But given the potential of Gucci, which is poised to benefit from the seemingly insatiable Chinese demand for luxury goods, traders reckon PPR is more likely to target an acquisition at the hard end of the luxury goods market (watches, jewellery and so on) rather than the soft end (clothes handbags etc.).
If so, something like Tiffany, which also has a 100 per cent free float, would make more sense. It’s hard, and PPR could utilise its retailing background to build its store presence. Set against that, one could argue that a deal to buy Tiffany (market value $9.2bn) wouldn’t thrill shareholders. After all, it’s not luxury in the sense that Boucheron or Bulgari are.
Anyway, PPR is doing its best to damp down the speculation.
The PPR group is a mixed bag, made up of disparate businesses also including Redcats, a mail-order firm; Conforama, a retailer of discounted household goods; Fnac, a chain of shops for books and music; Rexel, a maker of electrical equipment; and CFAO, an African conglomerate that mostly sells cars.
Financial markets remain uncertain about what to make of PPR and whether or not it is “new”. The main source of confusion is its lack of focus. Analysts at J.P. Morgan think the group is undervalued compared with others in the luxury-goods sector. But analysts at another big bank, Merrill Lynch, say its shares are expensive as a retail stock. The uncertainty could evaporate if PPR were to get out of retailing, as some people predict it might. But until that happens, it remains a muddle.
Veronica Novoselova, Rough&Polished, from Italy
