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News > International
Gucci gains as LVMH lurks
June 9, 1999: 10:06 a.m. ET

Italian fashion house reports 50% profits jump; hostile rival snaps at heels
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LONDON (CNNfn) - Italian fashion house Gucci attempted to shrug off the latest move by French luxury goods maker LVMH in their exhausting takeover battle by reporting a near 50 percent jump in profits Wednesday.
     The earnings report came after LVMH lodged two appeals with Dutch courts against Gucci and France's Pinault-Printemps-Redoubte (PPR), the company brought in as a white knight to repel LVMH. However, it could be two years before a ruling is made.
     After losing a crucial court case which approved PPR's $2.9 billion investment in Gucci last month, LVMH stated it will not pursue Gucci so long as PPR continues to hold a stake. The latest appeals aim to break the PPR tie and secure damages.
     LVMH reiterated its stance that it will not take last month's court defeat lying down. It lodged an appeal in the Dutch supreme court questioning the legality of PPR's purchase of Gucci shares, the same issue on which it had been defeated in a lower court.
     It also lodged a claim against Gucci for unspecified damages in a Dutch district courts resulting from the Italian firm's tactics during the heated takeover tussle.
     Meanwhile, Gucci said first-quarter net profits rose 48.6 percent jump to $60.2 million on a 7.7 percent rise in sales to $270 million.
     Gucci shares jumped 5 percent on the Amsterdam exchange in the wake of the results before being retreating to 62.50 euros ($65.30) in afternoon trading, a rise of 3.14 percent.
     Analysts welcomed the results as evidence that Gucci management could focus on strategic issues amid the fallout from the five-month battle with LVMH. However, profits were at the lower end of expectations given a weak performance in 1998 as a result of the economic crisis in Asia, a key Gucci market.
     LVMH said the supreme court could take up to two years to make a decision. The unlikelihood of LVMH making any near-term headway was confirmed when Standard & Poor's reaffirmed LVMH's credit rating and removed it from the list of companies threatened with a downgrade.
     The ratings agency said its decision was based on a view that LVMH was unlikely to make a full takeover bid for Gucci following the recent court ruling.
     LVMH (PMC) shares climbed 0.3 percent to 285.3 euros in afternoon trading in Paris.Back to top
     -- from staff and wire reports

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