PARIS, France - LVMH, the world' biggest luxury group, posted an unexpected slowdown in sales growth at its fashion and leather business, which includes the Louis Vuitton, Celine and Dior brands.

The Paris-based group, which also owns Krug champagne and Hennessy cognac, said growth at its biggest and most-watched division was 4 percent on a like-for-like basis in the nine months to Sept. 30, against 5 percent in the first half.

Analysts estimated the division's organic sales growth slowed to 2 percent in the third quarter from 7 percent in the second and 3 percent in the first. LVMH did not publish this figure on Tuesday.

Louis Vuitton, the world's biggest luxury brand in terms of sales, is paying the price for its shift upmarket, which some analysts expected would lead to short-term losses in sales.

"LVMH management always said the upmarket repositioning of the Louis Vuitton brand would take 18 months, but given the easier basis of comparison, these figures are disappointing," said Antoine Belge, a luxury goods analyst at HSBC.

Many analysts had expected the division's sales growth to remain at a level of at least 7 percent in the third quarter, with some expecting growth as high as 9 percent.

"The stock should react negatively to the bad numbers in Fashion & Leather," one Paris-based trader said. "Even if we do not know the performance of Louis Vuitton specifically, it should not be pleasing."

Louis Vuitton is undergoing its most significant leadership change in more than two decades, currently parting ways with long-standing designer Marc Jacobs and reported to be in complex talks with Nicholas Ghesquiere, formerly at Balenciaga, to replace him.

Last year, Yves Carcelle, who headed Louis Vuitton for more than 20 years, was replaced by Michael Burke, an LVMH veteran who previously headed Bulgari. This year, Delphine Arnault, daughter of LVMH founder and boss Bernard Arnault and Dior's former deputy managing director, became Louis Vuitton's No. 2.

CHAMPAGNE REBOUND

Luxury peer Burberry announced the surprise departure of its CEO earlier on Tuesday, to be replaced by the brand's designer, regarded by investors as an untested operational manager, sending shares of the UK brand lower.

Burberry published a 17 percent rise in retail revenue at constant currencies for the first half to Sept. 30 and same-store sales growth of 13 percent, which some analysts described as one of the best performances in the industry so far, however.

LVMH said its wines and spirits, and watches and jewellery businesses enjoyed a pick-up in sales in the third quarter.

It said champagne sales rebounded in the quarter, driven by strong demand in Asian and American markets, while Hennessy volumes also rose strongly.

The bright star of the group remained its Sephora and duty free retail shops, which together reported organic sales growth of 19 percent for the first nine months of the year, in line with the first half.

Overall, LVMH's turnover in the third quarter rose 8 percent like-for-like to 7.02 billion euros ($9.48 billion) in line with the previous six months.

Rival Kering publishes third-quarter numbers on Oct. 24.