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Sales surge at Kering's Gucci, slip at sister brand

A woman walks past a store of Gucci brand in Cannes, France, October 16, 2016. REUTERS/Eric Gaillard

By Astrid Wendlandt

PARIS (Reuters) - Italian fashion brand Gucci confirmed its turnaround with a 17 percent rise in third-quarter comparable sales, helping make up for a 10.9 percent sales drop at sister brand Bottega Veneta, parent Kering said on Tuesday.

Gucci, in double digit sales growth territory for the first time since 2012, accounts for more than 60 percent of Kering's operating profit. Analysts had expected its third-quarter sales growth to reach around 10 percent.

Under the leadership of designer Alessandro Michele and chief executive Marco Bizzarri, the brand has been rolling out a new "geek chic" look, revamping its stores and offering leather bags with painted insects and animals that have proven popular.

Asked if the turnaround was sustainable, Kering Finance Director Jean-Marc Duplaix said: "We have a plan for Gucci and we are not at the end of the plan yet."

He predicted more gains from the brand's new store concepts, product ranges and client loyalty programmes.

Yves Saint Laurent also surprised with a 33.9 percent jump in comparable third-quarter sales even though the French fashion brand parted ways with its star designer Hedi Slimane, replaced in April by Anthony Vaccarello.

"Kering posted one of the strongest beats in memory in the luxury sector, with Gucci and Saint Laurent significantly ahead of expectations," Exane BNP Paribas analyst Luca Solca said.

"Gucci is cashing in on a brilliant self-help programme, which has brought the brand back on the map."

But the group said its Italian tailor Brioni's sales were still declining. Brioni's creative director Justin O'Shea left after seven months in the job, having overseen an unexpected gothic makeover of the brand.

Kering has been through an intensive reshuffle in the past few months. In October alone, it appointed new chief executives for Balenciaga, Christopher Kane and Bottega Veneta.

Duplaix said Bottega Veneta's sales decline was mainly due to a drop in Chinese tourist spending in Japan and Europe, a pruning of its wholesale and retail network and fewer discounts.

"It will take time and it will require investments," Duplaix said about the brand's turnaround, adding that it could possibly return to growth in 2017 but its ascent would be "very progressive."

Duplaix said Kering's watch trading remained challenging adding that he did not think there was a "big difference between us and the market."

Overall, Kering's sales rose 10.5 percent while its Puma sports brand grew 10.8 percent during the period under review.

(Reporting by Astrid Wendlandt; Editing by Geert De Clercq and Ruth Pitchford)