* Kering luxury sales pick up in Q2 vs Q1
* LVMH fashion like-for-like sales up 5 pct in H1 vs 3 pct
* Kering says demand in China below previous levels
(Adds analysts' comments, background, details)
By Astrid Wendlandt
PARIS, July 25 French luxury groups LVMH
and Kering on Thursday reported a pick-up in
second-quarter sales, partly due to improved demand in Europe
and solid growth in Japan.
Kering said Europe enjoyed a "rebound" in the second
quarter, driven by stronger local and tourist demand and pointed
to buoyant business in Japan, where shoppers spent their money
at home, partly because of the weak yen.
Luxury industry leader LVMH said in a statement it
"continued to grow in Europe" and enjoyed "sustained momentum in
Demand for luxury goods has been patchy since the beginning
of the year, with a continued slowdown in China, the industry's
main engine of growth, particularly hitting watch sales, while
tourist flows declined in Europe in the first quarter.
For some brands, sales to tourists in Europe can account for
up to 60 percent of total sales, particularly in watches and
jewellery and local consumption in Europe has been depressed
over concerns about higher taxes and rising unemployment.
Kering Finance Director Jean-Marc Duplaix told journalists
in a conference call that demand in China remained at levels
"lower than what we have seen in the past."
As a case in point, Kering's Gucci sales in Europe rose a
higher-than-expected 10 percent in the second quarter and were
up 6 percent in Japan but fell 4 percent in China.
Duplaix also said that Kering was still in talks with
potential buyers of its mail order business La Redoute but
stressed that "there would be nothing new (about a potential
deal) this summer."
Kering changed its name from PPR last month to mark its
transformation from a retailer to a sports and luxury group that
today owns sports brand Puma as well as a string of fashion
brands such as Balenciaga and Stella McCartney.
Kering's luxury sales in the three months to June 30 were
up 9.4 percent on a like-for-like basis, compared with a rise of
6.4 percent in the previous three months.
Kering's fashion brands Alexander McQueen and Bottega Veneta
were behind the bulk of the growth, as sales growth at Gucci,
the group's biggest fashion brand, remained steady at a little
over 4 percent on a comparative basis.
"Even if the Gucci brand shares some of the issues faced by
Louis Vuitton around 'ubiquity', its margin momentum is
superior, and at the group level, Kering's performance is
boosted by brands like Bottega Veneta, YSL, which are big enough
(they account for 43 percent of total luxury sales) to act as
growth boosters," HSBC analyst Antoine Belge said in a note.
Kering posted a first-half operating profit of 842.7 million
euros, beating expectations of 808 million euros.
LVMH did not publish separate second-quarter figures but
also reported improving business trends, particularly at its
fashion and leather goods and perfume and cosmetics units.
Fashion and leather, LVMH's biggest division as it includes
the world's No.1 luxury brand Louis Vuitton, saw revenue in the
first half reach 5 percent on a like-for-like basis, up from 3
percent in the first quarter.
"It is interesting to see that LVMH's fashion and leather
division has reversed its decline in sales," said Mario Ortelli,
analyst at Bernstein.
Revenue growth from the fashion and leather division, which
was 10 percent in the first half last year on a like-for-like
basis, has been declining ever since and reached its lowest
level since 2009 in the first quarter of this year.
Analysts are worried that Louis Vuitton, which accounts for
nearly half of LVMH's operating profit and three-quarters of
fashion and leather revenue, has grown so big that there is
little growth left ahead.
There are also worries that consumers, particularly in major
markets such as China, are growing jaded with logo-branded
products and opting instead for more exclusive niche brands.
Operating margin at LVMH's fashion and leather unit
deteriorated in the first half to 31.8 percent, against 32.5
percent last year.
LVMH is expected to provide more details on its
second-quarter performance during a conference call with
analysts on Friday at 0730 GMT.
Overall, LVMH made a profit from recurring operations of
2.71 billion euros, slightly below the Thomson Reuters I/B/E/S
average estimate of 2.75 billion euros.
Kering and LVMH's performance remain below that of Hermes in
terms of sales growth as the French maker of Birkin and Kelly
handbags saw sales at constant currencies rise 16 percent in the
second quarter and 14.4 percent overall in the first half.
Last week, Hermes, Europe's third-largest luxury group in
terms of market capitalisation after LVMH and Richemont
, also raised its full-year targets after beating
(Reporting by Astrid Wendlandt; Editing by Geert De Clercq,