Kering shares at 15-year high as Gucci turnaround impresses

By Astrid Wendlandt PARIS (Reuters) - Shares in Kering surged to a 15-year high on Wednesday after flagship brand Gucci reported double-digit quarterly sales growth for the first time since 2012, sealing a much faster than expected turnaround. Kering shares rose more than 8 percent to a high of 204.1 euros as investors cheered Gucci's 17 percent jump in comparable third-quarter sales published on Tuesday night, significantly above a 10 percent market forecast. Gucci accounts for more than 60 percent of Kering's operating profit. The Italian brand has revived sales, which were flat or declining each quarter two years ago, to become one of the fashion industry's fastest-growing labels. That has put it in the same league as smaller rivals such as sister brand Yves Saint Laurent and Qatari-controlled Valentino and Balmain. Gucci "demonstrates, as LVMH did two weeks ago, that it is still possible for truly unique and innovative luxury brands with a strong heritage and brand equity to grow despite the ongoing macro headwinds affecting the sector," said Omar Saad, analyst at brokerage Evercore ISI in New York. LVMH shares also jumped earlier this month after Louis Vuitton posted an estimated 7 percent rise in third-quarter sales that came significantly above analysts' 2 percent estimate. Gucci, under the leadership of designer Alessandro Michele and Chief Executive Marco Bizzarri since early 2015, has adopted a vintage "geek chic" look that has caught customers' attention and translated into higher sales. Gucci's rebound provides further evidence that the luxury industry has become a market share game, analysts said. It has become more difficult than ever for big luxury brands such as Dior, Chanel and Prada to achieve growth as they can no longer boost revenues simply by opening new stores or lifting prices - after having done so excessively in recent years. To fight competition from niche and more exclusive labels, big brands are having to redouble efforts to surprise customers with audacious looks and marketing narratives. Gucci has revamped its stores in a baroque style, complete with Persian carpets, and come up with innovative new products, including a range of leather bags with painted insects and animals that have proven popular. Asked if the turnaround was sustainable, Kering Finance Director Jean-Marc Duplaix told analysts on Tuesday: "We have a plan for Gucci and we are not at the end of the plan yet." He predicted more gains from the brand's new store concepts, product ranges and client loyalty programmes. Yves Saint Laurent also surprised with a 33.9 percent jump in comparable third-quarter sales even though the French fashion brand parted ways with its star designer Hedi Slimane, replaced in April by Anthony Vaccarello. (Reporting by Astrid Wendlandt; Editing Susan Fenton)