Kering Sales Top Estimates on Demand for Saint Laurent

Kering SA rose in Paris trading after reporting second-quarter revenue that exceeded analysts’ estimates on surging demand for Saint Laurent dresses, and saying Gucci would return to growth in the second half.

The shares advanced as much as 5.6 percent, the steepest intraday gain in a year, and were trading up 4.9 percent at 159.80 euros as of 9:13 a.m. in Paris. Sales climbed 4 percent on a comparable basis, Paris-based Kering said yesterday in a statement after European markets closed. Analysts predicted 3.1 percent growth, according to the median of 20 estimates compiled by Bloomberg.

Gucci is introducing more expensive goods and refurbishing stores as it seeks to attract shoppers who want products few others have. The strategy, which contributed to a decline in quarterly sales at the brand, should lead to positive trends in the second half of the year, Kering said. Second-quarter Saint Laurent sales rose 29 percent on a comparable basis, exceeding the 22 percent gain predicted.

“Kering’s luxury brand portfolio remains attractive,” said Thomas Chauvet, an analyst at Citigroup. While the market remains focused on the core Gucci brand, “Kering’s other luxury brands continue to deliver outstanding revenue growth,” and now account for more than a third of profit, he said.

First-half recurring operating income fell 3.9 percent to 810 million euros, ($1.08 billion), Kering said, compared with the 800 million-euro median estimate.

LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury-goods maker, damped expectations last week after reporting first-half earnings that trailed estimates. LVMH said at the time that Asian demand for fashion and leather goods weakened significantly in the second quarter amid political unrest in Hong Kong, fueling concern that shoppers are tiring of the largest luxury brands.

While the slowdown at Gucci mirrors struggles that LVMH is having with Louis Vuitton, its biggest brand, Kering gets a larger portion of sales than LVMH does from smaller fashion and leather goods brands. Bottega Veneta, Kering’s second-largest luxury brand, also reported revenue growth that exceeded analysts’ estimates.

Kering said it will continue to implement plans aimed at stepping up the organic growth and operating cash flow of each of the brands of its luxury activities. The company also said it agreed to buy Swiss watchmaker Ulysse Nardin, without disclosing the price of the purchase, which is expected to be finalized during the second half of 2014.

“Ulysse Nardin benefits from a rich heritage, high profitability and solid growth prospects,” said Kering Chief Executive Officer Francois-Henri Pinault in a statement. “This structural acquisition will enable us to take advantage of the numerous synergies with our existing brands.”

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