Luxury goods companies trade on higher multiples than general retailers

Luxury goods companies trade on higher multiples than general retailers, so selling general retail businesses to buy higher multiple luxury goods companies risks value dilution for shareholders.

Although PPR will not comment on potential targets, analysts believe these could include companies such as Ralph Lauren, Levi Strauss, Abercrombie & Fitch, Tommy Hilfiger and Lacoste. The strategy is not without risk as such an extensive overhaul of the business will inevitably rely on selling and buying at the right prices. "PPR has a good track record in selling businesses at a good price but it is less good at buying - it bought Puma at the height of the market and paid a lot for Gucci Group," said Luca Solca, analyst at Bernstein Research.

"The strategy makes sense and would probably provide a lot of growth opportunity. However, one needs to ask what is PPR's competitive advantage in operating such lifestyle brands and why would they be successful at it?"

For Mr Pinault, whose mantra since taking the helm, has been "no acquisitions before disposals" it would be fitting if he could find the right brand at the right price that began with the letter R. Then PPR would still retain its relevance to the group's businesses, if Puma were to take the place of Printemps in PPR.

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