* Gucci Q4 sales growth 0.2 pct vs 0.6 pct in Q3
* Says due to upmarket repositioning
* Analysts say brand expanded in China too fast
* Yves Saint Laurent like-for-like sales jump 42 pct
* Kering net profit 50 mln euros vs 1.048 bln in 2012
(Recasts, adds details, management, analyst comment)
By Astrid Wendlandt
PARIS, Feb 21 Sales growth at Italian luxury
brand Gucci almost ground to a halt in the fourth quarter, hit
by over-expansion in China where demand weakened and a painful
Its performance is likely to reinforce concerns among
investors about the long-term growth prospects of mega-brands
such as Gucci and LVMH's Louis Vuitton as consumers
increasingly favour newer, more niche labels.
Gucci's parent Kering, which also owns Yves Saint
Laurent and Bottega Veneta, reported a steep drop in full-year
profits due to heavy restructuring costs.
Sales growth at Gucci, which accounts for more than half of
Kering's market value, fell to 0.2 percent in the three months
to Dec. 31 at constant currencies from 0.6 percent in the
previous quarter while analysts had expected an improvement.
In the 2000s, Gucci and Louis Vuitton milked demand for
designer logo products with price tags in the hundreds of euros
and boosted growth by opening shops at breakneck speed in new
markets such as China, Russia and the Middle East.
In response to signs of consumer fatigue with logo-heavy
products, Gucci and Louis Vuitton strengthened their higher-end
offering with more logo-discreet leather bags and fewer canvas
totes. But the brands say the strategy took its toll on sales.
Gucci's sales at constant currencies rose 2.2 percent in
2013 while the previous year, they were up 9 percent, 18.7
percent in 2011 and 11 percent in 2010.
Mirroring Gucci's woes, Louis Vuitton's sales growth has
fallen to low-single digits from above 10 percent three years
Kering Chief Executive Francois-Henri Pinault on Friday
argued Gucci's slowdown was self-inflicted and mainly due to its
repositioning and clean-up of the brand's retail network.
"Of course, if I want to increase Gucci's sales by 10
percent, I can just open the tap for entry-level price products
and everything will fly off the shelf," Pinault said. "But it
would be very dangerous for the exclusivity of the brand."
He said the number of entry-level products had been cut by
25-30 percent and the proportion of sales from no-logo products
reached 62 percent in the fourth quarter, against 44 percent the
"The strategy is working and helps us protect the
desirability of the brand for the years to come," Pinault said.
Analysts also blamed Gucci's troubles on opening too many
stores in China too quickly and sometimes in locations from
where the brand later had to pull out.
"Gucci is massively hit by its store repositioning right now
as its Chinese footprint was inappropriate," Erwan Rambourg,
luxury goods analyst at HSBC, said.
Kering Finance Director Jean-Marc Duplaix said same-store
sales at Gucci were negative in China and slightly negative
globally. For this year, he forecast they would grow in low
single digits and at constant currencies, in single digits.
"Gucci's slowdown is partly of its own making, but we also
believe the luxury market is moving away from the brand's logo
leather goods heritage and also toward ready-to-wear brands such
as Burberry, Bruno Cucinelli, Loro Piana, and Moncler, which are
all outperforming," Omar Saad, analyst at New-York brokerage
services and research provider ISI Group, said.
Gucci's slowdown contributed to a fall in Kering's shares of
as much as 3.6 percent in early trade on Friday. They closed
down 2.3 percent at 151.45 euros, the biggest faller on the
French blue-chip CAC 40 index, which closed up 0.6
Kering reported a steep drop in full-year net profits due to
the restructuring of mail order business La Redoute, sold
through a management buy-out, completing its exit from retail to
focus on luxury and sports brands.
YVES SAINT LAURENT
Analysts said Yves Saint Laurent was one of the bright spots
of Kering's results. Yves Saint Laurent, under the stewardship
of designer Hedi Slimane appointed in 2012, has become the
French company's fastest-growing major brand, with like-for-like
revenue up 42 percent in the fourth quarter alone.
Half of Yves Saint Laurent's sales came from wholesale
revenue, which was up 43 percent last year.
"Gucci's growth is a little disappointing," said Rambourg,
"But Yves Saint Laurent's performance in the fourth quarter is
Pinault said he was confident the group as a whole would
increase revenue and recurring operating income this year,
aiming for profitable organic growth at its luxury brands and a
relaunch plan for its Puma sportswear brand.
Puma, 85.6 percent owned by Kering, is banking on
high-profile signings to help to stop sales falling this year
after revenue tumbled more than expected in the last three
months of 2013.
($1 = 0.7293 euros)
(Editing by Tom Pfeiffer and Jane Merriman)