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Close up: Alexis Babeau, Managing Director, PPR

After signing Christopher Kane and Brioni, PPR’s managing director for luxury says its acquisition spree is set to continue.

On the eighth floor of French brand powerhouse PPR’s UK headquarters on London’s Shaftesbury Avenue, the group’s managing director for the luxury division, Alexis Babeau, is keen to show me the office’s impressive view of the city skyline, eagerly pointing out the capital’s newest landmark, The Shard, glistening in the sunlight.

Babeau makes regular visits to the UK, PPR’s second-largest European market, from his office in Cadempino in Ticino, Switzerland, but is only here for a whistle-stop 24 hours when I catch up with him to discuss his strategy for the luxury division, which houses labels such as Bottega Veneta, Gucci and Saint Laurent Paris. As you would expect, the Frenchman is impeccably dressed in a crisp blue shirt and tie when he joins me for a coffee in the office’s boardroom.

This is a period of growth for PPR, which has snapped up majority stakes in a number of luxury brands over the past year. In January, the group announced the acquisition of a 51% stake in designer label Christopher Kane, and finalised its majority stake in Chinese jewellery brand Qeelin in the same month. It also bought the lion’s share of Italian menswear brand Brioni last year.

Acquisitions are one of the factors driving growth at PPR. “We are looking at brands that are small to mid-size. We are looking for the brand to be well defined, well differentiated, and we are primarily looking at the growth potential more than the size [of the business]. And something we absolutely don’t want is cannibalisation within our portfolio.”

On that note, Babeau describes the purchase of Brioni as “completely complementary”, owing to the fact that a menswear-only brand was missing from its portfolio. “We are very happy to have Brioni with us and the brand is doing well.”

He adds: “First, it’s very much influenced by Asia, where the men are really in love with luxury product, and also because I think men, even in the Western world, take care of ourselves more and more.”

PPR’s brands all benefit from what Babeau describes as shared soft synergies - such as people - and hard synergies such as advertising, real estate and supply chain services, though he stresses that the group always protects the DNA of individual brands and wouldn’t resort to mass buying of materials, such as leather skins for example, to save costs.

The group also has a history of backing designers, having done so in the past with British designers Alexander McQueen and Stella McCartney, and now it plans to do the same with Christopher Kane.

The acquisition has been met with a warm response from Kane’s stockists, who are predicting great things for the partnership. Laura Larbalestier, buying director at London designer indie Browns, says: “It’s wonderful news and it’s very exciting to see they recognise his talent and how much he can still evolve. Browns was his first stockist so we are extremely delighted to watch his development. It’s nice to see with PPR’s support that he will be able to develop the collection even more.”

Ruth Chapman, joint chief executive at luxury indie mini-chain Matches, agrees.

“The announcement coincided with us buying the pre-autumn 13 collection and we’d just decided to significantly increase depth in the collection as it was so strong, so this was a great confirmation that our instinct has always been correct concerning Christopher Kane - and he is set to become an iconic British brand,” she says.

However, acquiring small to medium-sized luxury brands is only part of PPR’s strategy, explains Babeau: “Our strategy is first and foremost to grow our [existing] brands organically.”

Leaning forward in his chair, he enthuses: “How do we manage to do that? Well, primarily growing them on the retail side of the business, opening new boutiques, enlarging our boutiques, getting into new territories, and working at the same time on the product assortment we are offering to our clients.”

By product assortment, Babeau means brand extensions, and uses Gucci as an example. The largest of PPR’s brands, Gucci represents around 64% of PPR’s turnover, and had its own offer extended a couple of years ago with the launch of kidswear. “This year the category will be close to €70m (£60m),” says Babeau, raising his eyebrows as he emphasises the point. “So it’s a business of €70m (£60m) that three years ago was nothing.”

This, he says, expresses the strength and ability of PPR’s brands to launch new categories, and their untapped potential.

A quick glance over PPR’s latest financial results shows that the strategy appears to be working. PPR’s luxury division recorded revenues of €4.9bn (£4.2bn) in its full-year 2011 results, with the business’s latest set of reported figures for the third quarter of 2012 revealing the division was up 11.9%, driving revenue growth to 15.5% for the first nine months of last year.

The luxury division is also recording growth across all geographic regions, with Europe and Asia/Pacific each accounting for a 32% share of its 2011 revenue, with the US at 18% and Japan at 13%. Babeau admits that China has been “the growth engine of the industry for a while”, but he tells Drapers that, ahead of PPR unveiling its 2012 full-year results this month, he is unable to comment specifically on reports of a slowdown in China’s economy and its potential consequences.

PPR 2011 Key Figures

“China is a key market for us and will remain a key market. There will be ups and downs as in any market. But when you look at the number of people in China and the GDP growth, and really the aspiration for feeling good and looking good, I’m very positive,” he says.

Looking ahead, he says southeast Asian countries such as Indonesia “will certainly be a big thing for us one day as well”, and that PPR’s sales in Brazil and India, markets in which the luxury group is already present, “could be much bigger”.

PPR’s luxury division stands at 924 units, with 28 new boutiques opened in the third quarter of 2012 alone and a further 30 refurbished during the first nine months of last year.

Babeau explains that retail, rather than wholesale, is PPR’s focus when it comes to fashion and leather goods because it has a much tighter control on the environment, key to protecting the image of its brands. “If you take brands such as Stella McCartney and Alexander McQueen, we took the decision a few years ago when we saw that those brands were getting very strong, to speed up the retail expansion and to rebalance the business from wholesale to retail, and that is what we are currently doing.”

He adds that for a luxury brand, retail is “the best way to protect its exclusivity and exclusivity is our lifeblood.”

However, it’s not all about bricks and mortar. Last year, PPR partnered with ecommerce specialist Yoox to create a new joint venture company, which the luxury group retains a 51% share in, to accelerate the online development of Alexander McQueen, Balenciaga, Bottega Veneta, Sergio Rossi and Saint Laurent Paris.

He’s confident that the venture will yield positive results. “We have a vision for 2020 and in that vision we want to grow our sales online, double-digit year after year,” he says. “We start from a low base today with only a single-digit percentage of our sales online. So it’s fair to say that we have room to grow.”

Babeau is equally positive about the outlook for PPR and the luxury industry as a whole.

He says: “We have an industry that is enjoying several positive effects. There is a rise of wealth in the world, a rise of GDP. People are really looking more and more for luxury because they want to look good and feel good.

It’s something that will continue and I’m very optimistic.”

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