July 26, 2018 / 4:38 PM / 21 days ago

UPDATE 1-Kering rides out China fears with Gucci growth

* Operating income up 53 pct y/y, tops estimates

* Gucci still growing strongly, with record margins

* Kering focuses on luxury, fast-growing brands

* No slowdown in Chinese demand in Q2 - CFO (Writes through with comment from CFO on China)

PARIS, July 26 (Reuters) - Kering posted higher operating profits in the first half of the year, as resilient sales in China boosted its biggest earnings driver Gucci plus other fashion labels the group is looking to develop like Balenciaga.

Luxury companies have ridden a surge in Chinese demand in the past three years, jostling for attention from young shoppers with new designs and catchy digital campaigns.

A U.S-China trade dispute that rattled stocks and the yuan has fuelled fears Chinese demand might now take a hit, though luxury groups have so far said such concerns were unfounded.

"At this stage we've not seen any slowdown in demand from Chinese clients," Kering financial director Jean-Marc Duplaix told reporters, adding that the uncertainty had not hit footfall in stores but that the group would remain "very vigilant".

Gucci, which is booming after a flamboyant design makeover, showed it still had momentum, as margins hit a record high of 38.2 percent at end-June, just shy of a mid-term goal of at least 40 percent.

The brand is vying to overtake rivals like Chanel or LVMH's Louis Vuitton by revenue in the coming years, by boosting online sales and launching more beauty products.

In the second quarter alone, like-for-like sales, which exclude currency swings and acquisitions, rose 40.1 percent at the Florence-based label - slower than the nearly 49 percent in the first quarter but higher than most rivals. North American sales did particularly well, the group said.

Across Kering as a whole, recurring operating income for the first half of the year rose 53 percent year-on-year to 1.77 billion euros ($2.06 billion), topping analyst forecasts.

The Paris-based conglomerate - a rival to larger LVMH, owner of Christian Dior and Krug champagne - is doubling down on its core luxury brands, after spinning out German sportswear label Puma to its shareholders earlier this year.

It is also parting ways with smaller labels like Britain's Stella McCartney and Christopher Kane.

Instead, as peers also try to keep buyers hooked with a constant stream of fresh products, efforts are being ploughed into brands with big potential like Balenciaga, which has drawn a following with its luxury sneakers and edgy designs.

Kering is also trying to revamp Italian handbag maker Bottega Veneta, which posted a worse-than-expected 2.3 percent fall in comparable sales in the second quarter. In July, Daniel Lee, who previously worked at LVMH brand Celine, replaced veteran Tomas Maier as the creative chief. ($1 = 0.8582 euros) (Reporting by Sarah White and Sudip Kar-Gupta. Editing by Jane Merriman)

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