Kering's Gucci posts weakest sales growth in four years

Thu Oct 24, 2013 3:04pm EDT
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By Astrid Wendlandt

PARIS (Reuters) - Gucci still has more work to do to become a more exclusive brand, parent Kering (PRTP.PA: Quote) said on Thursday after the leather goods maker posted its weakest sales growth in four years.

Gucci, which accounts for more than half of Kering's valuation, has been hit like arch-rival LVMH's (LVMH.PA: Quote) Louis Vuitton by lower Asian demand and disruptions linked to efforts to 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 during the period.

By comparison, both brands still enjoyed sales growth of more than 10 percent between 2010 and early 2012, bouncing back from the 2008-2009 spending downturn triggered by the U.S. and European financial crises.

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

Rival brands such as Prada (1913.HK: Quote), Salvatore Ferragamo (SFER.MI: Quote), Hermes (HRMS.PA: Quote) and Burberry (BRBY.L: Quote) continue to report sales growth well above 10 percent.

"It would be wrong to extrapolate Gucci trends, or Louis Vuitton for that matter, to the overall industry," HSBC luxury goods analyst Antoine Belge said.

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