Kering's Gucci posts weakest sales growth in four years

Reuters

* Kering total luxury organic sales up 5.6 pct vsexpectations 7-8 pct

* Gucci organic sales up 0.6 pct, weakest growth since 2009

* Gucci China organic sales down "in low single digits"

* Puma Q3 organic sales down 0.8 pct

By Astrid Wendlandt

PARIS, Oct 24 (Reuters) - Gucci still has more work to do tobecome a more exclusive brand, parent Kering said onThursday after the leather goods maker posted its weakest salesgrowth in four years.

Gucci, which accounts for more than half of Kering'svaluation, has been hit like arch-rival LVMH's LouisVuitton by lower Asian demand and disruptions linked to effortsto reposition itself more upmarket.

Gucci's like-for-like third-quarter sales rose 0.6 percent,undershooting analysts' forecasts of at least 1 percent growth,while Louis Vuitton's sales rose an estimated 1-2 percent duringthe period.

By comparison, both brands still enjoyed sales growth ofmore than 10 percent between 2010 and early 2012, bouncing backfrom the 2008-2009 spending downturn triggered by the U.S. andEuropean financial crises.

The declining sales trends at Gucci and Louis Vuitton aremore a reflection of consumers' weaker appetite for mega brandsthan a sign of a general slowdown in the luxury goods market,analysts said.

Rival brands such as Prada, Salvatore Ferragamo, Hermes and Burberry continue toreport sales growth well above 10 percent.

"It would be wrong to extrapolate Gucci trends, or LouisVuitton for that matter, to the overall industry," HSBC luxurygoods analyst Antoine Belge said.

"The repositioning of both brands towards less logo and moreleather is working at full speed, but is a long-term process."

Suffering from being seen as too ubiquitous, Gucci and LouisVuitton are trying to strengthen their high-end offering withfewer logo-embossed goods and a greater variety of expensiveleather bags.

"There is still some progress to be made regarding thisrepositioning. This transformation is not over yet," KeringChief Financial Officer Jean-Marc Duplaix told analysts aboutGucci during a conference call.

Duplaix said no-logo handbags such as the Bamboo Shoppermade up 55 percent of total Gucci leather goods sales against 35percent in the third quarter of 2012, while the average handbagprice was 10 percent higher.

Gucci is also cleaning up its wholesale distribution,particularly in countries such as the United States, Japan andItaly, and refurbishing and enlarging directly operated storeswhere it now makes 77 percent of total revenue.

"The performance of Gucci is due to a consumer environmentin China that has become more negative and the brand's moveupmarket which has led to lower volumes of entry-price leathergoods," Duplaix told journalists in a conference call.

Analysts pointed to the strong performance of Kering's otherluxury brands in the third quarter with comparable sales atBottega Veneta up 16 percent, up 12 percent at Yves SaintLaurent while at other brands together, including StellaMcCartney and Alexander McQueen, they rose 9.4 percent.

MIXED PICTURE

Globally, Kering said the picture was mixed as Gucci'slike-for-like sales in China had dropped "in low single digits"during the third quarter and 2 percent in Western Europe, butthey rose 10 percent in Japan and 3 percent in North America.

The group's Puma brand, which is in the middle ofa restructuring and strategy revamp, saw quarterly revenue drop0.8 percent on a like-for-like basis.

Separately, Kering said it was still in talks with potentialbuyers for its La Redoute mail order business. The groupconfirmed it would have to inject cash into the business beforeoffloading it but declined to confirm a reported amount of 300million euros.

"The capital increase is an element of discussion, it is tooearly to elaborate on that," Duplaix said.

Duplaix said Kering expected to reach a deal before the endof the year and close the transaction in the first half of 2014.

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