PPR and Girard-Perregaux Sign a Long-Term Strategic Partnership

PARIS, June 20 /PRNewswire-AsiaNet/ --

PPR announced the signature of a long-term strategic partnership with the Sowind Group, a Swiss holding company based in La Chaux de Fonds headed by Luigi Macaluso. The Sowind Group includes the Haute Horlogerie brands Girard-Perregaux and JeanRichard, a Research and Development Centre, as well as Sowind Manufacture, maker of high-end watch movements. Under the partnership, PPR will own a 23% interest in the Sowind Group, with the possibility of increasing its stake under the terms of a shareholders' agreement. Mr. Macaluso will retain control of the company.

This strategic partnership represents the materialisation of a shared vision between the two partners regarding long-term growth prospects in the Haute Horlogerie segment. It will allow PPR and Girard-Perregaux to combine their know-how and knowledge base in terms of R&D, design, brand management, distribution networks and sourcing. Mr Macaluso will join the Gucci Group Management Committee and the Boucheron Board of Directors. Franois-Henri Pinault and Robert Polet will become Directors on the Sowind Board.

This long-term agreement offers Girard-Perregaux, one of the last independent, high-end Swiss watch "Manufactures", and the JeanRichard brand the means to fully exploit their potential for growth and innovation by teaming up with one of the major players in the luxury goods industry. As for PPR, the agreement confirms the Gucci Group's goal of building a strong presence in the Haute Horlogerie segment, one of the most promising luxury goods markets. The Gucci Group brands will thus benefit from outstanding watch-making expertise and will extend their sourcing for timepiece components.

Franois-Henri Pinault, Chairman and CEO of PPR, declared: "I am pleased that the bonds between our two groups are being strengthened, as we build a joint future in one of the most prestigious sectors of the luxury goods business. The PPR and Sowind groups share the same entrepreneurial values passed on through long family tradition. I have a great admiration for Girard-Perregaux, a brand founded in 1791 whose identity and worldwide influence is exceptional."

Luigi Macaluso, Chairman and CEO of the Sowind Group, stated: "I am extremely pleased to be able to work with a major group like PPR and, specifically, with the Gucci Group. This will be a truly rewarding experience. Our varied and complementary skills are based on common values of excellence. This agreement will mean new synergies and new long-term projects."

Robert Polet, Gucci Group CEO, said: "This is a tremendous opportunity for our brands to be in contact with the greatest watch-making expertise of Sowind. We are convinced that this agreement will create a number of important synergies for our watch brands and their further development."

About PPR

PPR develops a portfolio of high-growth global brands. Through its Consumer and Luxury brands, PPR generated sales of EUR 19.8 billion in 2007. The Group is present in 90 countries with approximately 93,000 employees. PPR shares are listed on Euronext Paris (# 121485, PRTP.PA, PPFP).

To explore the universe of PPR brands go to www.ppr.com: Fnac, Redcats Group (La Redoute, Vertbaudet, Somewhere, Cyrillus, Daxon, Ellos, The Sportsman's Guide, The Golf Warehouse and brands of the plus-size division), Conforama, CFAO, Puma and the Luxury brands of Gucci Group (Gucci, Bottega Veneta, Yves Saint Laurent, YSL Beaut, Balenciaga, Boucheron, Sergio Rossi, Alexander McQueen and Stella McCartney).

Sowind Group, the pinnacle of Swiss watchmaking Art

The Sowind Group is a Swiss << Haute Horlogerie >company owned by Luigi Macaluso who has been heading it since 1992.

Based in La Chaux-de-Fonds, the Group incorporates the Girard-Perregaux and JeanRichard brands, a watch << Manufacture >that develops and produces a complete portfolio of high-end movements (more than 100 variations) and collections of mechanical watches.

The Research and Development Centre is the company's cornerstone, with more than 80 patents and a strong percentage of the firm's turnover being re-invested in it.

Girard-Perregaux's roots date back to 1791 and the company history is rich in innovations bringing together design and technology, like the renown Tourbillon with three gold bridges created by Constant Girard in the 19th century.

Girard-Perregaux is represented globally in 550 prestigious points of sale and several exclusive boutiques, like the one in Gstaad.

JeanRichard is a brand dedicated to Daniel JeanRichard (a pioneer of watchmaking in the Neuchatel region during the 17th century) and presents a daring and innovative interpretation of the codes of traditional Swiss watchmaking.

Key Figures:

- 350 employees

- An annual production of around 20 000 units

- Watches with prices ranging from around 6,000 to 500,000 Euros

- Two unique museums: the Girard-Perregaux museum in Villa Marguerite and

the museum dedicated to watchmaking tools and machinery in the Villa

JeanRichard.

PPR Contacts:

Press:

Charlotte Judet

+33(0)1-45-64-65-06

cjudet@ppr.com

Analysts/Investors:

Alexandre de Brettes

+33(0)1-45-64-61-49

adebrettes@ppr.com

Emmanuelle Marque

+33(0)1-45-64-63-28

emarque@ppr.com

Website:

http://www.ppr.com

Sowind Contacts:

Press:

Andrea Caputo

+41-32-9113333

acaputo@sowind.ch

Website:

http://www.girard-perregaux.com

http://www.jeanrichard.com

SOURCE: PPR

In Q1 2008, PPR reported revenues of EUR4.9 billion, up 20% in reported terms and 4% on a comparable basis in terms of Group scope and exchange rates, compared to Q1 2007.

Fran�§ois-Henri Pinault, Chairman and CEO of PPR, noted:

"Thanks to its diversified and balanced profile, PPR has begun the year with a solid business performance, in tougher markets. Gucci Group's momentum underscores the success and relevance of the multi-brand strategy implemented by the Luxury Goods division, even as the Gucci brand itself experienced softer growth. Consumer activities lived up to our expectations with a satisfactory performance. All in all, given our steady revenue momentum, and the Group's proven strengths, I remain confident in PPR's ability to deliver another year of growth and enhanced financial performance in 2008."

                                            Change        Change
    (in EUR million)             Q1 2008   Reported   Comparable (1)

    Fnac                           1,026       + 2.9%         + 2.7%
    Redcats Group                    916       - 1.1%         - 4.4%
    Conforama                        790       - 0.8%         - 0.9%
    CFAO                             691      + 16.3%        + 17.5%
    Puma                             673                      + 6.6%
    Gucci Group                      816       + 4.0%         + 9.6%
    Inter-company sales and          (6)           ns             ns
    other
    PPR - Continuing operations    4,906      + 19.8%         + 4.1%
    Discontinued operations (2)      318


    (1) On a comparable basis in terms of Group scope and exchange rates.

(2) YSL Beaut�© for EUR162 million, Redcats Missy for EUR54 million, Empire Stores for EUR36 million, Surcouf for EUR60 million and Conforama Poland for EUR6 million.

Fnac maintains its focus on profitable growth

Fnac made a promising start to 2008 with revenues up 2.7% on a comparable basis versus Q1 2007. In France, despite an adverse calendar impact, the brand reported growth, fueled by good performance in Editorial Products, which gained market shares in all categories. On-line sales increased significantly. Business outside of France acted as a growth driver, particularly in Spain, Portugal, Italy and Brazil. Fourteen additional Fnac stores will open in France and abroad by the end of 2008.

Redcats in line with expectations

Redcats Q1 2008 revenues decreased by 4.4% on a comparable basis and 1.1% in reported terms compared to Q1 2007. The poor economic environment, particularly in the apparel market, weighed heavily on Redcats activity during the quarter. The leading multi-channel brands (La Redoute, The Sportsman's Guide, the US Large Size division and the Senior brands) were resilient. The Children-Family division reported satisfactory sales. On-line sales continued to post solid growth and represented 46% of Redcats home shopping revenue in Q1 2008.

Improving trends at Conforama

In Q1 2008, Conforama revenues dropped by 0.9% on a comparable basis from the Q1 2007 level. Business in March was affected by the negative calendar impact. Stores in France reported solid growth driven by the results of the Furniture segment, which outperformed the market in most product categories. Home Electronics sales were fueled by the robust performance of brown goods. Decorative Items posted solid growth. Conforama's business activity outside of France showed satisfactory resilience in a tougher macro-economic environment in Q1 2008. Italy further reduced its losses in the quarter.

An excellent start to the year for CFAO

CFAO Q1 2008 revenues, up 17.5% on a comparable basis, were driven by the outstanding growth in the Sub-Saharan Africa and Mediterranean regions. CFAO reported robust sales in French overseas territories. The strong growth of the automotive sector continued, and the year got off to an excellent start for Pharmaceuticals with new sustained momentum.

Good performance from Puma outside the US

In Q1 2008, Puma sales rose by 6.6% on a comparable basis, reflecting a significant slowdown in consumers environment in March. Retail stores posted another double-digit growth and accounted for 15% of the brand's Q1 revenues. Apparel and Accessories achieved very good results. Footwear growth was dragged down by the US economic slowdown. Double-digit growth was recorded in EMEA and Asia-Pacific, stimulated by sound performances in all product categories. Q1 2008 sales declined in the Americas, affected by the continued negative environment in the US mall-based business.

Success of the Gucci Group multi-brand strategy

Despite an adverse currency situation, Gucci Group's performance in a more challenging luxury goods market was in line with PPR's expectations. It posted solid growth in Q1 2008, with revenues up 9.6%, on top of challenging comparables in Q1 2007. Fashion and Leather Goods reported double-digit growth. Asia-Pacific excluding Japan continued to grow at a rapid pace (+26%), driven by a particularly buoyant Chinese market (+116%). Gucci Group revenues also rose in North America and Europe. Sales in Japan were flat in Q1. The Gucci Group global store network comprised a total of 511 directly-operated stores as of the end of March 2008.

A challenging quarter for the Gucci brand

Gucci brand revenues increased by 2.4% on a comparable basis in Q1 2008 (up 3.7% excluding Timepieces). Despite contrasted performances in mature markets, Gucci continued to expand in the emerging markets where it has a strong foothold. Trading was softer in wholesales but retail posted a satisfactory momentum. Action plans have already been implemented to enable the brand to regain a growth rate consistent with Group objectives. The 2008 Spring/Summer collections were very well received by customers and the brand achieved a good Pre-Fall and 2008 Autumn/Winter sales Campaign. At the end of March, the Gucci network comprised 238 stores.

Bottega Veneta continues to soar

Bottega Veneta Q1 2008 revenues surged by 31.5% on a comparable basis, driven by outstanding performances across all product categories. Sales momentum was sustained in all geographical areas: up 31% in Japan, 30% in Europe, 46% in Asia-Pacific excluding Japan and 19% in North America. The brand opened two stores during the first quarter, for a total of 113 stores at the end of March 2008.

Continuing successful strategy at Yves Saint Laurent

In Q1 2008, Yves Saint Laurent posted a 20.2% increase in revenues (up 7% excluding royalties, against very high comparables in Q1 2007). Solid growth was reported in the Leather Goods sector, driven by good momentum in all handbag lines, notably recently launched models (Besace, Ymail and Muse). Solid growth was posted worldwide. The quarter was marked by the reopening of the brand's flagship store at Place Saint-Sulpice in Paris, heralding a new Yves Saint Laurent store concept.

Sustained growth for Other brands

The Q1 2008 revenues of the Other brands rose 20.8% on a comparable basis. Balenciaga posted high double-digit growth in all its product categories and geographical areas, boosted by the commercial success of its 2008 Spring-Summer collection and the acceleration of store openings. Boucheron pursued its double-digit growth. The Sergio Rossi 2008 Spring-Summer handbag and shoes collections were a huge commercial success. Alexander McQueen posted a solid performance and Stella McCartney continued its momentum. The Other brands had a total of 96 directly-operated stores at the end of March 2008.

CONFERENCE CALL

PPR will hold a conference call for analysts and investors: at 3:00pm (Continental Europe); 2:00pm (UK); 9:00am (East Coast time, USA), on Thursday April 24, 2008

    Conference call dial-in: +33(0)1-70-99-42-66
    Replay dial-in: +33(0)1-71-23-02-48
    Passcode for the replay: 4870041# (available until May 16, 2008)
    PODCAST of the conference call available at http://www.ppr.com
    PRESENTATION

The slides (PDF format) will be available ahead of the conference call at http//www.ppr.com

About PPR

PPR develops a portfolio of high-growth global brands. Through its Consumer and Luxury brands, PPR generated sales of EUR 19.8 billion in 2007. The Group is present in 90 countries with approximately 93,000 employees. PPR shares are listed on Euronext Paris (# 121485, PRTP.PA, PPFP).

To explore the universe of PPR brands go to http://www.ppr.com: Fnac, Redcats Group (La Redoute, Vertbaudet, Somewhere, Cyrillus, Daxon, Ellos, The Sportsman's Guide, The Golf Warehouse and brands of the plus-size division), Conforama, CFAO, Puma and the Luxury brands of Gucci Group (Gucci, Bottega Veneta, Yves Saint Laurent, YSL Beaut�©, Balenciaga, Boucheron, Sergio Rossi, Alexander McQueen and Stella McCartney).

                     Appendix 1 : Sales in Q1 2008

    (in EUR million)           Q1      Q1     Change      Change
                              2008    2007   Reported   Comparable
                                                            (1)
    Fnac                     1,026.4   997.5    + 2.9%        + 2.7%
    Redcats Group              915.9   925.8    - 1.1%        - 4.4%
    Conforama                  789.8   795.9    - 0.8%        - 0.9%
    CFAO                       690.6   593.7   + 16.3%       + 17.5%
    Puma (2)                   673.3                          + 6.6%
    Gucci Group                816.2   784.5    + 4.0%        + 9.6%
    Gucci                      513.0   530.5    - 3.3%        + 2.4%
    Bottega Veneta             106.2    84.8   + 25.2%       + 31.5%
    Yves Saint Laurent          63.1    55.2   + 14.5%       + 20.2%
    Other brands               133.9   114.0   + 17.5%       + 20.8%
    Inter-company sales and     -6.0    -1.5        ns            ns
    other
    PPR - Continuing         4,906.2 4,095.9   + 19.8%        + 4.1%
    operations
    Discontinued operations    318.1   351.8
    (3)


    (1) On a comparable basis in terms of Group scope and exchange rates.
    (2) Puma fully consolidated from April 1, 2007.

(3) YSL Beaut�© for EUR162 M, Redcats Missy for EUR54 M, Empire Stores for EUR36 M, Surcouf for EUR60 M and Conforama Poland for EUR6 M in Q1 2008.

Website: http://www.ppr.com

SOURCE PPR

Shares in PPR fell today after higher-than-expected first-quarter sales at a group level were offset by a disappointment at the Gucci brand, where reported sales dropped 3.3 percent and like-for-like sales growth of 2.4 percent fell short of consensus. matt.gil@thomsonreuters.com mrg/jrr

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He said the group believes the first-quarter slowdown at the brand will prove to be a "blip" and that April-to-date trends support this view.

Palus said the overall advertising and promotion spend at the brand will remain unchanged and that fixing the problem will therefore have "no impact on the operating margin".

He said PPR's existing target for its luxury brands to beat estimated overall market growth of 7 percent in 2008 still applies to the Gucci brand. "It is our objective indeed," Palus said.

Shares in PPR fell after higher-than-expected first-quarter sales at a group level were offset by a disappointment at the Gucci brand, where reported sales dropped 3.3 percent and like-for-like sales growth of 2.4 percent fell short of consensus.

The brand had "resumed very high growth" in "high-single digits" in retail sales in the first three weeks of April and wholesale order growth was in double-digits, Palus told analysts.

"We think that one of the causes for this temporary loss of traction stems from our decision to refocus our handbag and leather goods business on the top end of the pyramid. Our objective was to reinforce the very high-end, chic image of the brand. We have achieved this.

"This being said, while we were emphasizing high-end products, we somewhat let up the merchandising and advertising pressure on mid-range products. This is the segment that is currently dragging down Gucci's momentum," the deputy chief executive said.

"Looking ahead, we are aiming to achieve a better balance across al segments of the product offering: entry-price points, mid-range and high-end. We have already started re-balancing our advertising and communications spend to achieve this.

"So we are quite confident that this is something more of a blip than something that could last longer," he said.

Palus said he wants to "insist we must not talk about a refocus on mid-range".

"We need to be more balanced between entry-price points, mid-range products and high-end, aspirational products. We will not sacrifice one or another segment to the other," he said.

The newly-refurbished Gucci Fifth Avenue store in Manhattan is already boosting sales, he said, admitting, however, that large revamps can hit sales temporarily, and that around 5 percent of total floor area for Gucci in the first quarter was out of action as a result.

This proportion is expected to drop in the remainder of the year as the refurbishment campaign turns to smaller outlets.

By region, Gucci sales in emerging markets grew by almost 25 percent in the first quarter and represented 30 percent of total sales compared to 24 percent a year earlier.

Hong Kong and mainland China together accounted for 14 percent of sales and posted 50 percent growth in the period.

Eastern Europe saw a 63 percent increase in sales.

In more mature markets, where Gucci sourced 67 percent of sales, the performance was "solid and contrasted," Plaus said.

Europe, accounting for 33 percent of sales, was weighed by lower tourist numbers as oil-rich visitors from Russia and the Middle East failed to offset sharply lower numbers of Chinese, Japanese and U.S. travellers, all put off by the record strength of the euro.

Japan, which accounted for 15 percent of sales, was a "drag" on performance, Palus said and the group has taken "strong measures" to fix the situation, adjusting prices, advertising methods and the composition of the local team.

Moving away from luxury, Palus said French retail outlets Fnac and Conforama saw double-digit sales growth in the first three weeks in April, pointing to a "very encouraging" second quarter.

He said in the first-quarter Fnac's gross margin improved thanks to the group's refusal to enter a price war with peers.

On YSL Beaute, he said the pre-notification of the sale of the unit to l'Oreal has been filed with the European Commission and if phase one approval is granted, he expects completion of the deal by June 30.

Turning from disposals to acquisitions, Palus said the group's stake in Germna sporting goods group Puma now stands at 66.8 percent.

At 5.05 p.m., the group's shares were down 3.00 euros, or 3.55 percent, at 81.40 while the CAC-40 was down 32.26, or 0.65 percent, at 4,912.39. matt.gil@thomsonreuters.com mrg/jrr/mrg/vlb

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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