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Gucci boosts PPR profit

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Gucci has seen sales growth accelerate in 2006.

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Gucci Group NV

PARIS, France (Reuters) -- PPR, Europe's largest non-food retailer, reported a 9.9 percent rise in its operating profit on Thursday, driven by gains at its Gucci luxury unit, and said sales growth had accelerated in the first two months of 2006.

The owner of the Printemps and Fnac chain stores said earnings before interest and tax rose to 1.084 billion euros ($1.29 billion) from a restated 986 billion euros in 2004, slightly below the consensus forecast of 1.092 billion euros given in a Reuters poll of analysts.

Last year was the first for PPR without Rexel, the electrical equipment and cable retailer it sold in December 2004, allowing it to focus on general retailing and luxury.

It said its operating profit in retail slipped 0.7 percent last year to 754 million euros, or 5.1 percent of sales.

All retail units except its home furnishing store Conforama posted "healthy performances" in France and abroad, it said.

Operating profit at its luxury goods division, built around the Gucci brand, rose 35.4 percent to 390 million euros.

The operating margin in the luxury division rose 2.2 percentage points to 12.8 percent of sales.

"The rise in recurring operating income reflects the sound operating profitability in the retail activities and outstanding performance in luxury goods despite the unfavourable impact of exchange rate fluctuations," PPR said in a statement.

It said that at constant exchange rates, operating profit would have grown 19.1 percent.

Group net profit rose 11.2 percent to 539 million euros from a restated 485 million euros in 2004 and the company said it would propose a dividend of 2.72 euros, a rise of 7.9 percent.

Group sales in the first two months of the year were up around 7 percent, led by a more than 19 percent gain in its luxury division. General retail sales were up 4 percent.

That compared with full year group sales growth in 2005 of 4.2 percent. It is also an acceleration on the fourth quarter, when general retail sales grew 2.9 percent and luxury sales grew 13.4 percent.

Fideuram Wargny analyst Guy Francheteau said the results were broadly in line with the consensus but above his own forecasts and the news on early 2006 sales was very positive.

"The financial structure is strengthened thanks to better free cash flow so their gearing now gives them some room for external growth in luxury," he said.

"The (sales) outlook is also very encouraging."

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