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Tuesday, 19 June, 2001, 17:13 GMT 18:13 UK
YSL relaunch drags down Gucci
Model featuring Gucci luxury goods
Luxury goods group Gucci has revised down its earnings forecasts, after hitting snags in a campaign to revive the Yves St Laurent brand.

Gucci, owner of brands including Sergio Rossi and Boucheron, has said that revenues for this year will come in 6% below earlier forecasts at $2.45bn.

The group blamed much of the loss on an effort to revive the Yves St Laurent division, and wrestle the brand from the hands of "inappropriate" traders.

The division is expected to lose $75m this year, compared with the $50m Gucci had earlier hoped, reflecting "the need to make investment in product design, marketing and communication", Gucci chief Domenico De Sole said.

Yves St Laurent has also incurred costs in the setting up of an own-brand store network, said Mr De Sole.

But Gucci remains confident that the business is heading towards sustained profitability, and on track to become "one of the most successful brands in the luxury industry", he said.

And, overall, Gucci revenues rose 5.5% to $559.7m in the February-to-April quarter, compared with the same period last year.

Leather row

The firm credited much of the rise to an "outstanding" performance by the Gucci division itself, where sales rose 15% in all, and by almost one half in France.

Stella McCartney accepts the award for designer of the year at the VH1 Vogue Fashion Awards
Stella McCartney: animals rights concerns
The business recorded its highest operating margin ever, of 27%.

But Monday's statement also underlined the firm's dependence on leather goods, where "Gucci's success continued unabated", a reliance which has created tension in the group's joint venture with UK fashion designer Stella McCartney.

Ms McCartney, like her ex-Beatle father Sir Paul, is an animal rights supporter.

Mr De Sole rated Gucci's joint project with another top UK designer, Alexander McQueen, as an "important foundation for future growth" at the YSL Beauté division, where turnover slumped by 20%.

Shares slide

Mr De Sole's comments failed to reassure traders, who sent Gucci stock below 90 euros on Tuesday morning.

Shares in Gucci, which despite its Italian heritage is based in Amsterdam and traded on Euronext, recovered to close down 5.35 euros at 96.25 euros.

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See also:

29 Nov 00 | Business
Gucci sues luxury rival
16 Nov 99 | The Company File
Gucci buys YSL
28 May 99 | The Company File
LVMH may abandon Gucci bid
27 May 99 | The Company File
Gucci court victory over French rival
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