PPR CEO Francois-Henri Pinault “Uber Optimistic” On Company’s China Prospects
In the hopes of expanding further into the jewelry space and increasing its already significant footprint in the mainland China market, the French luxury giant PPR is reportedly in talks to acquire an as-yet-unnamed Chinese luxury brand. Coming nearly a year after PPR CEO Francois-Henri Pinault said he was interested in acquiring a Chinese brand “with its own identity” that differentiates itself from European-style luxury items, Bloomberg reports this week that PPR is currently in early-stage talks, with the mysterious acquisition to possibly be completed within this year.
Though China’s luxury market — which has been on a three-year-long tear, is expected to register lower aggregate growth than in 2011, Pinault said in May that he remains “uber optimistic” about his company’s prospects there. PPR’s luxury division, which includes brands like Gucci, Bottega Veneta and Yves Saint Laurent, rose nearly 20 percent in the first quarter of this year, led by a 20 percent rise in emerging markets like China. Luxury demand in the Greater China region may be changing, but it’s not disappearing anytime soon.
PPR is reorganizing to focus on luxury goods and so-called sports-lifestyle brands such as Puma to tap rising demand for branded apparel and accessories in Asia and Latin America. The company, which sold furniture retailer Conforama last year, also plans to sell online retailer Redcats and the Fnac electronics and media chain, with some proceeds being used for acquisitions.
Small- and medium-sized companies with growth potential would interest PPR, which has looked at targets in Brazil and Asia, according to Pinault. The Paris-based company agreed to buy Italian suitmaker Brioni Roman Style SpA for less than 350 million euros ($430 million) in November and surf, skate and snowboarding clothier Volcom Inc. for $608 million in May 2011.
In many ways, PPR’s moves mirror those made over two years ago by Hermès, which launched its own “made in China” luxury brand, Shang Xia (Jing Daily interview) in September 2010. Though we have our very strong suspicions of which brand PPR is hoping to acquire, we’ll hold off on speculation for the moment. One thing we will say that PPR is probably making a smart move looking to acquire a jewelry brand rather than a “soft luxury” label. As Jing Daily noted last week, Chinese high-end consumers are expected to continue — if not ramp up — their purchases of “hard luxury” like gold, diamonds and branded jewelry despite the broader luxury slowdown.