Jul 27, 2015
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Kering's Gucci makes unexpected rebound in Q2

Jul 27, 2015

Gucci, the flagship brand of French luxury and sportswear group Kering, posted a 4.6 percent rise in underlying second-quarter sales on Monday, marking a much sooner-than-expected rebound under its new creative and management duo.

Kering Finance Director Jean-Marc Duplaix said the brand had benefited from strong demand from Chinese tourists in Japan and Western Europe, while Gucci's sales in China were boosted by discounted sales of its previous designer's collections.

Gucci AW15/16, Milan Fashion Week - PixelFormula

Analysts had expected Gucci, which accounts for nearly 60 percent of Kering's operating profit, to suffer a 2.5-3 percent drop in like-for-like sales in the three months to June 30, slowing from an 8 percent fall in the previous three months.

Kering's first-half operating profit fell 5.4 percent to 773.2 million euros ($859 million), which Duplaix said was partly due to significant investment in marketing and communications at recovering sports brand Puma.

Many analysts expected Gucci's repositioning under Chief Executive Marco Bizzarri and creative head Alessandro Michele, in place since the start of the year, to take several quarters, and longer than the six months Kering initially predicted.

Gucci has been ailing for more than two years, partly due to a lack of innovative designs, excessive price increases and a focus on high-end products, as well as tough trading conditions in China.

It was not yet clear whether Gucci's latest strong sales performance indicated a lasting improvement in its desirability or whether it was a blip influenced by short-term boosts such as discounted sales.

"Gucci delivered a significant positive surprise in terms of organic growth," Exane BNP Paribas analyst Luca Solca said, cautioning that the performance could in part be due to "de-stocking activity, especially in China".

Duplaix said Michele's first collection, shown in New York in June, had been very well received but that it would only hit the shelves at the end of the third quarter.

Kering earlier on Monday named Grita Loebsack, ex-head of skincare at Unilever, to lead its emerging fashion brands unit regrouping Alexander McQueen, Stella McCartney, Tomas Meier and Balenciaga.

The move is the latest in a series of high-level management changes at the group over the past year that have included a new head of watches and jewellery and a new chief executive for the Boucheron jewellery brand.

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