Gucci sales slid further in Q3, Kering says, dampening revival hopes 

By Tassilo Hummel and Alessandro Parodi

PARIS, Oct 22 (Reuters) - Kering PRTP.PA on Thursday said sales at its flagship label Gucci fell by 6% in the third quarter, dragged down by weak demand in China, dampening hopes for the luxury group's revival anytime soon.

Sales at Gucci, which accounts for roughly half of group profit, were down to €1.29 billion ($1.44 billion) in the quarter, Kering said, while total group revenue fell by 1% when adjusted for currency swings.

Asked by journalists on a call if returning to overall growth was still the aim for Kering this year, finance chief Armelle Poulou declined to comment, pointing to the publication of full-year results.

Lower-than-expected quarterly sales at peers LVMH LVMH.PA and Hermes HRMS.PA, and signs of cooling demand in the United States have added to investors' concerns around Kering's turnaround.

Store footfall, in particular in China, remains the main problem at Gucci, where sales have been declining for more than three straight years, Kering said. Revenue from the brand's own store network was down 9%, while wholesale and licensing revenue was up.

Kering plans to ramp up spending on marketing and client experience to attract more shoppers to Gucci stores, Poulou said.

"We keep on carrying out our plan with the utmost discipline," Poulou said, adding the group has so far reduced its retail network by 105 stores and was targeting 125 closures by the end of the year.

Hoping to bounce back from years of decline, Kering last year tapped former Renault CEO Luca De Meo to overhaul the group. He has launched a five-year plan aimed at doubling its operating profit margin, but has had to contend with the economic fallout of war in Iran and slowing consumer sentiment in China.

De Meo aims to double Kering's profit margin from 11.1% in 2025 by the end of the decade through cost cuts, more store closures and a push to streamline supply chains, but analysts have said mere efficiency measures won't be enough to turn around a business whose brands have lost appeal.

Both Anthony Vaccarello, the creative director of its second-biggest brand Saint Laurent, and Alexander McQueen designer Sean McGirr left their posts this month.

The recent changes are likely to pile even more pressure on Demna, who is nearing his first full year at the helm of Gucci, which he sought to reignite with a bold bet on daring, sexy styles reminiscent of the brand's successes under Tom Ford.

($1 = 0.8934 euros)