In his comments on the Group's 2002 performance, Serge Weinberg, Chairman of the Management Board and CEO, noted:

"Though 2002 was a difficult year for the global economy, we managed to maintain our activity in line with the prior year level, on a comparable basis. Furthermore, sales growth in the second half of the year clearly reflected more positive trends.
We limited the impact of the business slowdown on our operating performance in actual terms, while at the same time continuing to invest heavily in our Retail and Luxury Goods operations.
Having disposed of the Guilbert mail order business and the Credit and Financial Services division on very favourable terms, we strengthened our financial structure. We lowered our debt-to-equity ratio from 75% at 2001 year end to 53.9% on December 31, 2002.
The most important development of 2002 was the launch of a major strategic shift aimed at transforming Pinault-Printemps-Redoute into a retail and luxury goods distribution group, focused on individual customers and their needs in terms of well-being and lifestyle. Most of this shift should be completed by late 2004. Its main objective is to enter a new phase in our quest for growth and profitability. The Group will thus deliver much stronger long-term organic growth and will structurally improve its return on capital employed."
 

Sales show good resilience

Pinault-Printemps-Redoute consolidated sales totalled EUR 27,375.4 million in 2002, down 1.5% from 2001. At comparable structure, exchange rates and number of days, Group sales dropped by 0.5%. This virtually unchanged performance reflects factors such as a slowdown in business in North America, chiefly due to lower business investment in the US. Excluding North America, sales rose by 0.9% at comparable structure and exchange rate, reflecting the solid commercial performance by Group companies in a difficult economic climate. This positive commercial performance yielded market share gains in virtually all product categories.

External growth operations had a positive net impact of EUR 116.1 million on sales, mainly due to the acquisition of Madelios in January 2002 in the Retail division, and to the full-year effect of acquisitions completed by Rexel and Guilbert in 2001 and by CFAO in 2002. Sales also reflected the negative effects of the disposal of the Guilbert mail order business on October 18, 2002 (Business-to-Business division). In the Luxury Goods division, sales also reflected the full-year consolidation of the acquisitions completed in 2001 (Balenciaga, Bottega Veneta, Bédat & Co, Di Modolo).

In the fourth quarter of 2002, sales recorded a strong rebound, with a 1.7% increase at comparable structure, exchange rates and number of days, versus a 1.7% decline in the first quarter of 2002. This turnaround was evident in three of the Group's Divisions, especially in Retail and Luxury Goods, which posted increases in fourth quarter sales of 3.5% and 3.8%, respectively.

Improvement in gross margin and profitability of Retail division

The Group's gross margin totalled EUR 10,589.8 million, a slight 0.4% decline in actual terms, compared with a 1.5% drop in sales. The 0.5 point increase in gross margin as a percentage of sales reflects the companies' sound competitive positions and improvements in the Group's purchasing strategy, owing mainly to more widespread implementation of the Group-wide systems introduced two years ago.

The impact of lower sales on operating income was contained by the Group's positive performance in terms of gross margin coupled with cost-containment measures. Including the negative effects of exchange rates and structural changes as well as higher development costs in Luxury Goods, operating income amounted to EUR 1,826.9 million, down 7.7%. Excluding these items, operating income dropped by only 2.8%. Development costs reflect the Group's investment in its brands, in Retail and especially in Luxury Goods, with 25 store openings in the Retail division and 58 in Luxury Goods. In 2002, developments accounted for an additional EUR 805 million in sales by the Retail and Luxury Goods divisions while negatively impacting both divisions' operating income by EUR 179 million.

The operating performance of the Retail division improved significantly in the second half of the year, with an 8.9% increase in operating income in the second half, compared with a 5.6% decline in the first half of 2002.

Net income boosted by realised capital gains

The Group's net interest expense amounted to EUR 414.6 million, down 0.8% from 2001. Excluding Gucci Group's net available cash, interest expense fell 12.3%, due to falling interest rates.

The Group posted net non-recurring income of EUR 1,278 million, compared with net non-recurring expense of EUR 33 million in 2001. Non-recurring income includes items such as capital gains from the sale of the Credit and Financial Services division and the Guilbert Mail Order business, for a total of EUR  1,840.7 million. It also reflects restructuring costs of EUR 230.9 million (including Rexel) and the writedown of Pinault-Printemps-Redoute treasury stock for EUR 179.2 million.

Before amortisation of goodwill, net income Group share was EUR 1,813.1 million in 2002, up 103.6% over 2001. After amortisation of goodwill, net income Group share amounted to EUR 1,589.2 million in 2002, a sharp 111.1% rise over 2001.

Major improvement in financial structure

At December 31, 2002, the Group's financial structure had improved significantly, with a debt-to-equity ratio of 53.9%, versus 75% at December 31, 2001. The Group's net financial debt fell sharply to EUR 4,948.8 million. The improvement reported on December 31, 2002 is due primarily to the two major disposals completed in the second half of 2002.

Net cash from operating activities amounted to EUR 1,383.6 million, down 16.5% from 2001, owing to lower cash flow.

Operating investments net of disposals stood at EUR 672.4 million in 2002. Regarding gross operating investments, the main items were as follows: innovation and store openings accounted for EUR 323.1 million versus EUR 269.2 million in 2001; logistics and IT investments represented EUR 210.6 million and refurbishment and renovation accounted for EUR  168.6 million.

Net financial divestment amounted to EUR 3,075.8 million from disposals of the Guilbert Mail Order business and the major portion of the Credit and Financial Services division. Acquisitions for the period included the purchase of additional shares in Gucci for EUR 125.1 million, raising the Group's stake in Gucci Group's capital to 54.4%, payment of the remainder of Conforama's stake in Emmezeta for EUR 193.4 million, and the buyback of minority interests in Finaref before the disposal of this company.

In the event of a possible acquisition of 100% of Gucci Group's capital in March 2004, the Group has sufficient liquidity to meet its commitments.

 2002 highlights

- Further expansion: In 2002, the Group continued to expand in Retail and Luxury Goods with 83 new stores opened in France and abroad, including 25 in the Retail division, representing additional selling space of over 45,000 sq.m, and 58 in the Luxury Goods division.

- New concepts and new brands prove successful: in 2002, the Group launched several innovative concepts, such as Fnac Digitale, designed around digital products, Histoires de chambres, the new VertBaudet catalogue of children's home furnishings and clothing, and the Brylane Kitchen catalogue in the US. Printemps further demonstrated its commercial strength with the success of its Sportswear division (Citadium and Made in Sport) and of Printemps du Luxe. Lastly, Surcouf expanded outside Paris with two store openings.

- Restructuring at Rexel: in October 2002, Jean-Charles Pauze, the new Rexel Chairman and Chief Executive, announced plans to adjust the company's operations to the economic environment by stepping up the pace of cuts in operating expenses, streamlining the supply chain and branches planned in certain countries, and by applying greater selectivity in terms of investments. These measures generated non-recurring charges of EUR 162.7 million in 2002.

- Major disposals: in the second half of 2002, the Group completed two major disposals as part of its strategy of refocusing on the individual customer: it sold the Guilbert Mail Order business to Staples Inc. as well as most of its Credit and Financial Services division. Facet, the Conforama store card business, was sold to BNP Paribas. Finaref (with the exception of Facet) will be sold in two instalments (61% in December 2002 and 29% in the first quarter of 2004) to Crédit Agricole SA. The Group will retain a 10% stake in Facet and Finaref along with control of the client databases and marketing plans.

Subsequent events

- On January 2, 2003, Pinault-Printemps-Redoute redeemed the EUR 1.1 billion issue of bonds convertible or exchangeable for new shares (OCEANE) issued in June 1999.

- Pinault-Printemps-Redoute raised its stake in Gucci by 3.8% between January 1, 2003 and January 24, 2003 to 58.2% as of that date. The Group gave CAI Cheuvreux irrevocable discretionary authority to acquire a maximum of three million Gucci shares for the period January 24 to April 4, 2003. At February 28, 2003, it held 59.7% of Gucci.

- Fnac established a joint venture with the Taiwanese-Japanese group Shin Kong Mitsukoshi (SKM), Taiwan's leading department store chain. Under this agreement, four new Fnac stores will be opened by the end of 2003.

- The December 2002 agreements between PPR and Crédit Agricole were finalised on February 26, 2003, with the sale of the first instalment of 61% of the equity capital and voting rights of Finaref and Finaref Nordic.

- As of the end of February, sales of the Retail division were up 7% at comparable structure and exchange rates.

Dividend

At the May 22, 2003 Annual and Extraordinary Shareholders' Meeting, the Management Board will recommend payment of a 2.30 euro-per-share dividend, the same as in 2002. Shareholders will be entitled to dividend tax credit ("avoir fiscal") under the provisions of current regulations. After approval by the Annual and Special Meeting, the dividend will be paid on June 6, 2003.

Parent company statements

The parent company posted 2002 operating income before tax of EUR 805.3 million, versus EUR 52.9 million in 2001. 2002 net income stood at EUR 244.4 million, versus EUR 162 million in 2001.

CONTACTS

Media:
Juliette Psaume +33 1 44 90 63 02

Analysts/Investors:
David Newhouse +33 1 44 90 63 23
Alexandre de Brettes +33 1 44 90 61 49

Media website:  www.pprlive.com
Analysts/investors website:  www.pprfinance.com