A ready-to-buy CEO with an eye for luxury

By Patricia Sellers, Fortune editor-at-large

(Fortune Magazine) -- FranÇois-henri Pinault, 44, chairman and CEO of PPR

With $23 billion in revenues, PPR, François-Henri Pinault's luxury-brand and retail empire, is bigger than Anheuser-Busch, Gap, or McDonald's. But Pinault is intent on giving the French company his father built an overhaul. He recently sold PPR's department-store chain, Printemps, for $1.4 billion. He's rumored to be considering a sale of book and electronics retailer FNAC, which posted $5.6 billion in 2005 revenues.

And with PPR's stock up 26% this year, investors are predicting that Pinault will acquire a new luxury label to add to the ten he already has. Clad head to toe in PPR brands--Stella McCartney suit, Gucci shoes--the elegant CEO talked with FORTUNE editor at large Patricia Sellers about possible acquisitions, Gucci's future, and the trouble that comes with managing global brands.

Are you going to sell retail operations like FNAC to buy more luxury brands?

I don't need to sell anything to buy luxury goods.

Unless you buy a big brand like Hermès.

Hermès has a market capitalization of about 9 billion euros ($11.4 billion). The company's sales are 1.4 billion euros ($1.8 billion), and net profitability is approaching 20%. To rationalize that stock price, Hermès would have to almost triple in size and maintain its margins. It's very risky. I'd rather look at [smaller brands].

What kind of brands?

We're a little bit weak in jewelry and watches and some accessories, like the entry level of handbags.

You like watches, don't you?

I love watches. I have 64, to be exact.

Half of PPR's 2005 sales came from France. As you globalize, where do you see growth?

The luxury-goods market is growing 8% to 10% annually. Asian consumers represent 40% of the worldwide market. I think they will represent 70% within five years. We're opening our first Gucci stores in India, in Mumbai and Delhi, next year.

Gucci's sales now exceed $2 billion a year. Won't mass-market size hurt the brand?

We've had to fight rumors that Gucci was going mass. It's not true. Gucci is going upward. This year Gucci's five top-selling handbags are priced 15% above 2005, not because we changed the price but because we launched new products using more sophisticated materials. We have to innovate. It's the only way to fight counterfeiting.

Your rival LVMH has sued eBay, claiming that Louis Vuitton and Dior products on the site are fake. Are you suing eBay?

No. We're talking to them. Gucci is among the most counterfeited brands in the world. In Venice they sell fake Gucci bags on the street right in front of the Gucci store. We call the police and nothing happens. We found a fake Gucci store in China. It's closed now. The Chinese government is more active than before.  Top of page