France's PPR, owner of Gucci and Yves Saint Laurent, said Thursday its 2006 net profit rose 28% on strong momentum in the luxury division and said trading in its retail division in the first two months of 2007 was higher than in the fourth quarter.
The company is forecasting further improvements for 2007 based on existing action plans in both retail and luxury goods that include ramping up store network renovation, PPR said in a statement.
Jean-Francois Palus, chief financial officer, said Gucci and Conforama stores would be among those getting renovations in 2007.
"PPR will work on improving the positioning of its products in shops and go upscale on all its brands," he said.
The Paris-based company said net profit grew to 685 million euros ($899 million) in 2006 against 535 million euros in 2005, on strong momentum in its luxury division and solid growth in retail.
This was above the average of seven analysts' estimates of 636.9 million euros ($836.57 million).
PPR Chairman and CEO Francois-Henri Pinault said in the statement, "Our ambition for 2007 is to further improve the Group's operating and financial performances and to significantly improve value creation."
PPR said it plans to pay a dividend of 3 euros ($3.94) per share for 2006, an increase of more than 10% from 2005's dividend of 2.72 euros per share.
The company said free cash flow from operations rose to a record level of 1 billion euros ($1.31 billion).
Some analysts had voiced concerns about the challenges ahead for the group because of the sluggish performance of the retail-end of the business.
Earlier this week, PPR announced the sale of its Kadeos gift voucher business to French hotels group Accor SA for 210 million euros ($275.83 million).
In late January, PPR posted a 5.9% rise in 2006 revenues from continuing operations to 17.9 billion euros ($23.51 billion) on an actual basis and a 4.8% increase on a comparable basis on 2005.