Serge Weinberg, Chairman of the Pinault-Printemps-Redoute Management Board, made the following statement: "In 2003, the Group held up well while pursuing the implementation of its strategy under excellent terms. All the Retail companies continued to gain market share in France and to expand internationally, while maintaining their earnings. Luxury Goods demonstrated their ability to bounce back in the last months of the year, while continuing to invest in their development. Overall, the performance of the 'New PPR' improved substantially in the second half of the year. In addition, the initial positive effects of the restructuring undertaken by Rexel began to be felt, with an improved operating margin in the second half. Lastly, the Group continued to implement its strategic shift under excellent terms while maintening a robust financial structure. In the first two months of 2004, our activities achieved a rate higher than in the previous quarter. This acceleration strengthens our confidence in the outlook for growth and profitability of the 'New PPR' in 2004."
 

» Reported and Pro Forma Sales: further market share gains in France and international expansion

· 'New PPR' pro forma

The growth in pro forma sales of the New PPR results from a 3.6% increase in sales of the Retail activities and a 5.4% increase in Luxury Goods.

In France, the Retail companies recorded further gains in market share in most of their product categories. Internationally, and particularly in Europe, Retail companies continued to grow successfully, expanding store networks and developing Redcats catalogue sales outside France. E-commerce maintained its strong performance, marked by 52.7% growth in Internet sales to 751.7 million euros.

The Luxury Goods business posted a sharp upturn starting in the summer, following an extremely challenging first half.

· Pinault-Printemps-Redoute reported

The drop in reported 2003 sales reflects changes in the scope of consolidation from disposals of non-core Business-to-Business and consumer credit companies for nearly 2.5 billion euros as well as the negative impact of currency fluctuations (991.5 million euros), mainly the weakness of the US dollar, and, to a lesser extent, of the British pound, against the euro.

» Strong operating performance

· 'New PPR' pro forma

The growth of the 'New PPR' pro forma gross margin reflects unfavourable mix effects, with limited growth of 2.5% in Luxury Goods, affected by a mediocre economic climate during a large part of the year, and a 3.6% increase in the Retail pro forma gross margin, virtually in line with sales growth. Retail companies continue to thrive to constantly improve their purchasing conditions. Leisure and Home Furnishings division rose by 4.4%, with Apparel and Lifestyle up 2.1%. The pro forma gross margin stood at 43.4%, versus 43.8% in 2002.

EBITDA remained virtually unchanged in 2003. This reflects the strength of the gross margin, as well as cost control by the New PPR. EBITDA of the Retail business was up 3% while margin of the Luxury Goods business was down 7.8%.

2003 EBIT reflects a 0.9% increase in Retail and a 19.2% drop in Luxury Goods. Luxury Goods EBIT was hard impacted by the challenging environment from March to June, lower profitability of the Gucci brand, and deepening losses of emerging brands, stemming in part from investments in further development. The last months of the year saw a marked upturn in business and improved operating performance, along with the gradual disappearance of specific negative factors. The increase in EBIT posted by the Retail companies reflects the further increase by CFAO (up 6.3%) and the excellent performance of the Apparel and Lifestyle Division (up 10.9%), driven by Redcats. The 5.1% EBIT decline of the Leisure and Lifestyle Division reflects a slight increase at Fnac - despite the impact of lower music sales on gross margin - more than offset by the decline of the furniture market, where Conforama gained market share and boosted its gross margin. The gradual rise of Conforama's international purchasing organisation impacted 2003 EBIT but should lead to an improvement in the company's performance in the coming years.

· Pinault-Printemps-Redoute reported

Reported gross margin and EBIT mainly reflect the negative impact of disposals of non-strategic assets and foreign exchange fluctuations.

» Improved net Financial Expenses

The Group's net financial expenses fell by 414.6 million euros to 313.6 million euros. This marked improvement reflects the sharp drop in the Group's average net financial debt despite the purchase of a further stake in Gucci.

The average interest rate of the Group's net debt amounted to 3.4%, down 20 basis points versus 2002.

» Non-recurring Expenses

The Group posted non-recurring expenses of 31 million euros in 2003. This includes proceeds from the sale of 66.5 million euros in assets, restructuring costs of 73.8 million euros and 25.8 million euros in costs related to litigation.

» Income Tax

Tax expense of 143 million euros in 2003 reflects tax savings of 67.5 million euros related to non-recurring items. The effective tax rate excluding non-recurring items amounted to 21.4%, compared with 27.7% in 2002. The lower rate of tax on ordinary income is mainly attributable to the lower effective tax rate in Luxury Goods.

» Income from Equity Affiliates

Income from equity affiliates totals 54.9 million euros. This mainly reflects the equity accounting of Credit and Financial Services activities in 2003, at 39% through November 30, 2003, and 24.5% effective December 1, 2003.

» Amortisation of Goodwill

The sharp decline in goodwill amortisation expense stems mainly from the effect of the disposals made in 2002 and 2003, chiefly Guilbert.

» Minority Interests

The drop in minority interests (100.2 million euros, versus 155.3 million euros in 2002) mainly reflects the increase in Pinault-Printemps-Redoute's interest in Gucci Group.

» Net Income (Group share)

After amortisation of goodwill, net income totalled 644.6 million euros. Before goodwill, net income totalled 755 million euros.

» Net Earnings per Share

After amortisation of goodwill, net earnings per share amounted to 5.66 euros in 2003, compared with 6.66 euros in 2002.

» Capital Structure

Despite considerable changes in the scope of consolidation, the Group's cash flow declined by just 10.7% in 2003.

Net capex was largely covered by cash flow from operations, reflecting lower operating investments in Luxury Goods, following a peak in 2002.

The change in consolidated shareholders' equity is partly due to the drop in minority interests related to the increased stake in Gucci Group. Shareholders' equity (Group share) rose by 6.7%.

» Further implementation of the Group's strategy

The Group continued to implement the strategy initiated in 2002, aimed at concentrating its activities on the individual customer, with a focus on Retail and Luxury Goods.
 
In this context, Pinault-Printemps-Redoute raised its stake in Gucci Group from 54.38% to 67.58% for a total investment of 1,223.4 million euros in 2003.

The Group pursued its non-strategic disposal programme, with the sale of the Guilbert Contract business for 815 million euros, of Pinault Bois et Matériaux for 565 million euros and an additional 14.5% of the consumer credit business for 371.6 million euros.

» Other highlights

· Pinault-Printemps-Redoute actively pursued its expansion policy with new store openings in France and overseas (8 store openings at Fnac, 7 at Conforama). Furthermore Conforama introduced a new store layout in 11 new stores and launched a new visual identity.

· The Group significantly bolstered its capital structure during the year, launching a Euro 1.1 billion OCEANE convertible bond issue and a Euro 750 million note issue. On October 2, 2003, Pinault-Printemps-Redoute received from Gucci Group an exceptional dividend under the form of a return of capital of Euro 13.5 per share, for a total amount in proportion to its stake in the Luxury Goods Group.

» Dividend

At the Annual General Meeting on May 25, 2004, the Management Board will recommend a dividend of 2.4 euros per share, up 4.3% versus 2003. After approval by the Annual General Meeting, dividend payment will be made on June 4, 2004.

» Parent company accounts

The parent company's ordinary income before taxes stood at 587.9 million euros, versus 805.3 million euros in 2002.

The parent company posted non-recurring income of 964 million euros in 2003. Net income for the year stood at 1,476 million euros, versus 244.4 million euros in 2002.

» Subsequent events and outlook

· Strong activity levels in the first two months of 2004

In the first two months of 2004, the Retail companies recorded growth of 5.9% on a comparable structure and currency basis basis and 4.1% on a reported basis. This improvement reflects the continued sales momentum of most Group companies in France and overseas. 

· Gucci Group public offer

On April 1, 2004, Pinault Printemps Redoute will launch a public offer for all Gucci shares on the Amsterdam and New York Stock Exchanges at a price of USD 85.52 per share.  

* To facilitate a better comparison of the 2002 and 2003 accounts, pro forma income statements were prepared in accordance with the following principles:
- Companies sold or deconsolidated in 2003 and 2002 were deconsolidated effective  January 1, 2002.
- Companies acquired, fully consolidated for the first time in 2003 and during 2002, were integrated over a 12- month period in 2003 and 2002.
- For foreign subsidiaries, the 2002 income statement items were converted at the average 2003 exchange rate.