Kering's Gucci and Puma sales disappoint

PARIS - PPR missed first-quarter sales forecasts, particularly for its Gucci fashion label and Puma sports brand, hit by sluggish trading in Europe and slower growth in China.

The French group, which also owns fashion houses Yves Saint Laurent and Bottega Veneta, said on Thursday it had not noticed any improvement in China, still the luxury industry's main engine of growth despite a recent moderation in demand.

"We do not see any signs of a pick-up in China," Chief Financial Officer Jean-Marc Duplaix told reporters in a conference call.

PPR's comments echoed those from archrival LVMH, which pointed to slower sales growth in Europe and forecast little improvement in China in the near future.

The latest raft of trading updates from listed luxury groups including Hermes indicate their brands in China have been hit hard by the government's crackdown on conspicuous consumption and on the country's gifts-for-favours custom.

And based on luxury executives comments, the cultural shift could last some time.

Luxury watchmakers said this week they expected sales growth to slow this year as recovery in the United States and buoyant Middle Eastern demand fail to offset what appears to be a deep-rooted slowdown in China.

But in the North American luxury market, which looks resilient when compared with crisis-hit Europe, PPR said trends remained positive with revenues from that region up 8 percent.

PPR said luxury goods sales in China rose around 10 percent in the first quarter but in Europe they were up only 3 percent, due to lower local demand and a drop in tourist flows.

Gucci, the world's second largest luxury brand after LVMH's Louis Vuitton, saw 9 percent sales growth in North America and 5 percent in Japan and its performance was in "high single digits," in China.

Last year, Gucci's first-quarter sales were up 15 percent in China and up 52 percent during the same period in 2011.

PUMA SALES DOWN

Regarding Puma, the group said the bulk of the brand's underperformance was due to weak demand in Italy and France.

"The division has been affected by a depressed economic environment in Europe," Duplaix said.

Puma closed 45 unprofitable shops in the first quarter and PPR said it aimed to close almost as many in the near future.

The French group has poached the chief executive of Danish jeweller Pandora to help turn round Puma's fortunes.

PPR posted total first-quarter like-for-like sales up 3.1 percent, undershooting forecasts of 5 to 6 percent.

Gucci's sales were up only 4 percent against expectations of a 6 percent rise, slowing from 8 percent the previous quarter.

"This is disappointing as PPR had been outperforming the luxury goods sector for several quarters," one London-based analyst said.

PPR's sports and lifestyle division, which includes its near 80 percent stake in Puma, saw first-quarter sales fall 2.5 percent against forecast growth of 1 percent. Sales at Puma alone were down 2.3 percent on a like-for-like basis.

PPR is changing its name to Kering in June to mark the completion of its transformation from a retailer to a sports and luxury group.

This week, it agreed to acquire control of Milanese jeweller Pomellato for an undisclosed sum, making good on its pledge to expand in the fast-growing branded jewelry market.

Looking ahead, the group pledged to remain vigilant on costs and improve financial results in 2013.

PPR shares, which gained 26 percent since the beginning of the year, closed up 0.54 percent at 178.5 euros.