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Kering issues profit warning for full year 2013

Third largest luxury group, French based pany Kering warned Wednesday that 2013 profit “will be down very significantly compared with 2012,” hit by exceptional charges from its sporting brand Puma  and the continuing disposal of French catalog business La Redoute.

The move to unload La Redoute is one of the final steps in the company’s long-term shift, toward reshaping its businesses around luxury brands, including Gucci, Stella McCartney and Saint Laurent Paris, and its sports and lifestyle business, which includes Puma and Volcom, while shedding its low-growth retail branches.

Yet the strategy has hit hurdles and the new focus on sporting goods has led to losses at a time when Kering already is facing slowing growth in its luxury business. Kering—previously known as PPR SA—took control of Puma for €5.3 billion ($7.1 billion) in 2007.

Last week, the German sportswear maker cut its earnings outlook for 2013, citing impairment charges. The main brand of Kering’s sports and lifestyle division has been struggling with a challenging business climate, especially in Europe and Asia, for some time and in May lowered its annual operating profit guidance.

Meanwhile, the disposal of La Redoute is also set to be a costly transaction for Kering, which is facing political pressure in its decision to hand over the business. La Redoute, which employs around 2,500 in the north of France, has drawn attention from public officials, as the company’s employees fear massive jobs cuts by any future owner.

On Tuesday, Kering Chief Executive François-Henri Pinault met with Martine Aubry, the mayor of Lille and a high-profile member of the ruling Socialist party, in a bid to calm growing concerns regarding the mail-order business at a time of high unemployment in France. Kering said Wednesday it has received offers for La Redoute and will announce its decision soon. The company added that it plans to select “the best option” to ensure La Redoute’s future, “in the interests of the company, its employees and the region where it is based.”

But the choice is set to have a “significant impact” on the earnings from its discontinued operations, which is expected to report a “strongly negative” result at the end of the year.

Puma Black Label by Alexander McQueen, Fall Winter 2013-14

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