July 27, 2015 / 5:51 PM / 4 years ago

Kering's Gucci produces unexpected rebound in sales

PARIS (Reuters) - Gucci, the flagship brand of French luxury and sportswear group Kering (PRTP.PA), 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.

A model displays a creation as part of the Gucci Autumn/Winter 2015 /16 collection during Milan Fashion Week, February 25, 2015. REUTERS/Alessandro Bianchi

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.

Analysts had expected Gucci, which accounts for the bulk 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 it making a significant investment in marketing and communications at recovering sports brand Puma (PUMG.DE).

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 the markdowns.

“We think that it is still very early days, and one good quarter does not make the beginning of a trend,” UBS said in a note.

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

“For the second half, we should continue to see negative trends in wholesale but much less negative than in the first half,” Duplaix said regarding Gucci.

He added that Kering had not seen any major improvement in Hong Kong and Macau and would consider closing stores if it could not renegotiate rents.

Kering earlier on Monday named Grita Loebsack, ex-head of skincare at Unilever (ULVR.L), to lead its emerging fashion brands unit grouping 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 jewelry and a new chief executive for the Boucheron jewelry brand.

($1 = 0.8999 euros)

Editing by James Regan and Greg Mahlich

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