PPR and Puma, Proof of A New Idea of Luxury

It was announced today that PPR, the parent group of Gucci, Yves Saint Laurent and Boucheron, to name a few, has acquired 27 percent stake in Puma for 1.4 billion euros (or $1.9) with plans for a full acquisition. The move is a smart one for PPR which is still transitioning from a group of mostly mass retail brands to a holder of bigger margin luxury brands. No, Puma does not have the cache of, say, Halston, which recently sold to the Weinstein brothers and Hilco, a Canadian private equity brand. But neither did they have to pay luxury valuations, which for Halston may have been as high as 20 times sales. You could almost hear the analysts breathe a sigh of relief.

And why not? On the plus side, Puma is still a recognizable brand name with much the same growth strategy as the rest of the PPR stable -- international expansions. (Asia is still largely untaped by Puma). And the margins at Puma are not far off what they are at luxury labels. Plus PPR can add experience in the retail sector to Puma, an area they have struggled with. One PPR staffer, designer Alexander McQueen, has already done a collaboration with Puma. Another, designer Stella McCartney, has a clothing line with Puma competitor, Adidas.

In order to complete the acquisition, they may have to sell another of their old-generation holdings, like Finac (a French music retailer) or Conforama (France's largest home furniture store and second largest appliance store) to generate cash. They have promised to pay 330 euro (or $441.11) for the remaining shares. Odds are PPR shareholders won't mind. As one analyst said, "which would you rather own? Puma or Finac."