* Gucci like-for-like sales up 7 pct
* PPR total like-for-like luxury sales up 12 pct
* Says disposal of Redcats will take several months
By Astrid Wendlandt
PARIS, Oct 25 Gucci, the Italian fashion brand
owned by French group PPR, said trading had become
tougher and competition fierce in China's largest cities.
Gucci, the world's No.2 luxury brand behind Louis Vuitton
in terms of sales, confirmed a slowdown in the luxury
sector as its revenue growth decelerated to 7 percent in the
third quarter from 10 percent in the second and 12 percent in
Its performance mirrors slowing growth at other major luxury
brands like Burberry and Louis Vuitton in big markets such as
LVMH's fashion and leather sales, of which Louis
Vuitton makes up 75 percent, saw comparable sales growth slow to
5 percent in the third quarter from 8 percent in the second and
12 percent in the previous three months.
PPR's results follow profit warnings by Mulberry and
larger British rival Burberry, which have helped
cement the view that a three-year boom in the luxury goods
market is coming to an end.
China - the luxury sector's main driving force since the
financial crisis of 2007/2008 - has been putting a lid on luxury
spending in recent months in response to a government crackdown
on corruption and conspicuous spending.
In addition, Chinese consumers have been cultivating a
new-found appetite for less high-profile, logo-centric brands
such as PPR's Balenciaga and Yves Saint Laurent.
"We see that the taste is going for more sophisticated
products and the market is tougher but we believe we have the
right strategy for Gucci," PPR CFO Jean-Marc Duplaix told
analysts on a conference call about China.
"In Tier 1 (most populated) cities, the competition is quite
fierce, the more dynamic cities are Tier 2 (less populated)."
Gucci's sales in China, which had enjoyed high double-digit
growth in recent years, reached "high single digits" in the
third quarter of 2012 but were "above 10 percent" on a
nine-month basis, he said, adding he was confident Gucci's
margins would improve this year.
PPR's total luxury sales rose 12 percent to 1.593 billion
euros ($2.06 billion), and overall group sales grew 6.6 percent
to 2.561 billion in the third quarter on a comparable basis.
PPR is the world's third-largest luxury group behind LVMH
and Switzerland's Richemont.
PPR, which did not give a precise forecast for the full year
other than improved sales and profits, said the disposal of its
Redcats mail order unit would take several months and all
options remained open.
Duplaix said talks regarding the disposal of Redcats' U.S.
operations were well-advanced and discussions regarding its
children's and family brands had started.
PPR, which wants to focus on luxury and sports brands, has
been looking for buyers for Redcats' children's brand Vertbaudet
and family brand Cyrillus as well as U.S. operations and its
flagship mail order company La Redoute.
Earlier this month, PPR unveiled plans to spin-off its CDs
and books retail chain Fnac in 2013, having failed to find a
buyer for the business which has been hammered by music piracy
and competition from online retailers.
Duplaix said it would be listed through a distribution of
shares to shareholders, with details to be made public in
PPR shares, which have gained 20 percent so far this year,
closed down 1 percent at 130.9 euros.