* 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 (Reuters) - 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 upmarket repositioning.
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 ago.
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 previous year.
"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 percent.
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.
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 very impressive."
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