Kering's Gucci posts bigger than expected Q1 sales drop

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By Astrid Wendlandt

PARIS, April 21 (Reuters) - Kering's Gucci posted

a bigger than expected drop in first-quarter sales on Tuesday,

which it blamed on a transition period as its flagship brand

works to regain momentum under a new creative and management

duo.

Gucci, which accounts for nearly 60 percent of Kering's

operating profit, saw comparable sales fall nearly 8 percent in

the three months to March 31, while analysts had expected a drop

of 3-6 percent.

"Our priority is to give Gucci new impetus," Kering Finance

Director Jean-Marc Duplaix said.

Kering sacked Gucci's chief executive and designer in

December to try to stem declining sales. It named Marco Bizzarri

as CEO, after he oversaw Bottega Veneta's stellar growth, and

promoted in-house designer Alessandro Michele as creative head.

Duplaix reiterated Kering's previous prediction that Gucci's

performance would only start to improve in the second half of

the year, once Michele's collections hit the shelves.

Sales at Gucci's own retail network of 502 stores fell 4

percent in the quarter, including a 10 percent slide in the

Asia-Pacific region as its performance in Greater China

"deteriorated compared to earlier in the year".

However, retail revenue remained stable in North America and

rose 6 percent in Western Europe.

Kering said it planned to continue pruning Gucci's portfolio

and beefing up entry-level products such as small leather goods

and luggage which had not been performing well. The brand would

also continue investing in online retail.

Asked about moves by rivals such as Chanel to cut prices in

Asia to reduce discrepancies with Europe, Duplaix said the

company did not want to react immediately.

For certain brands and products there could be some

harmonisation across regions, excluding value added tax or

customs duties, he said.

Kering's No.2 luxury brand Bottega Veneta also saw a

slowdown in the first quarter, with revenue growth of 3.1

percent on a comparable basis.

Duplaix blamed poor trading in Hong Kong and Macao, where

tourist flows dried up after last year's pro-democracy protests

and where Bottega Veneta made 19 percent of its sales.

Kering's Puma sports brand posted a 13 percent

rise in sales to 825 million euros in the first quarter, up 4.5

percent on a comparable basis. Duplaix said he expected Puma's

sales growth in the second quarter to be similar to the first.

Duplaix added that the sale process for Kering's Sergio

Rossi shoe brand was "ongoing" and expected to clinch a deal

before the end of the year.

($1 = 0.9294 euros)

(Editing by James Regan and David Clarke)