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Gucci, YSL shine as Kering profits beat forecast

French luxury and sports brand group Kering delivered a forecast beating rise in 2016 profits and sales on Friday, driven by the successful revival of its biggest brand, Gucci, and strong sales at fashion house Yves Saint Laurent.

The owner of the Stella McCartney and Puma brands also vowed to further boost its operating performance and cash flow generation this year despite a world business environment it said remained uncertain.

The strong showing provided further evidence of a recovery in the luxury goods sector, after rival LVMH posted record revenue and profits for 2016 and Hermes struck an upbeat note for 2017.

Recurring operating income for the year rose 14.5 percent to 1.886 billion euros ($2.01 billion) while group revenue rose 8.1 percent on a comparable basis to 12.385 billion euros.

This compared with 1.83 billion euros for profit and 12.28 billion euros for sales according to a Reuters consensus conducted with Inquiry Financial.

By 0829 GMT, Kering shares were up 2 percent, having opened up over 4 percent, leading gainers on the CAC-40 index of French blue chips.

“Excellent end of the year for Gucci,” said CM-CIC analysts.

Gucci, under the leadership of designer Alessandro Michele and Chief Executive Marco Bizzarri since early 2015, has revamped its stores and adopted a vintage “geek chic” look that has proved popular with customers and translated into higher sales.

Fourth quarter comparable sales at Gucci, which makes over 60 percent of Kering’s profit, rose 21.4 percent, beating analysts expectations of 13 percent. This was an acceleration from already stellar 17 percent growth in the third quarter.

The performance was achieved despite Gucci’s decision to terminate markdowns in its stores, finance chief Jean-Marc Duplaix told a conference call.

Yves Saint Laurent, which accounts for over 10 percent of Kering’s luxury sales, continues to progress with new designer Anthony Vaccarello at the helm since April.

Yves Saint Laurent sales rose 20.5 percent during the quarter while the recurring operating margin of the division jumped over the 20 percent mark in the full year.

Bottega Veneta remained a weak spot with sales down 8.6 percent in the quarter. The brand has been hurt by a slowdown in Chinese tourist spending in Japan and Europe. There were, however, signs of an improvement in Chinese tourist spending in western Europe in the last quarter of the year, the group said. (Reuters)

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