Will Luca De Meo Bring the Required Turnaround at Kering?

This report analyzes the leadership transition at Kering and the strategic implications of appointing Luca de Meo as CEO.

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Source: https://www.reuters.com/business/retail-consumer/gucci-owner-kering-posts-16-fall-q3-sales-weak-china-demand-2024-10-23/

Executive Summary

Luca de Meo’s appointment as CEO marks a pivotal moment in Kering’s history. This leadership shift signals a historic departure for Kering, marking the first time the company will be led by someone outside the Pinault family. It reflects the group’s urgent need for renewal amid brand stagnation and market underperformance. For the first time, the luxury group behind Gucci, Saint Laurent, Bottega Veneta, and Balenciaga is being led by an outsider, following François-Henri Pinault’s decision to step down after two decades at the helm. The market’s response was swift and optimistic: Kering shares surged nearly 12% on the news, while Renault, where de Meo previously served as CEO, saw its stock fall by almost 8%, highlighting investor confidence in his leadership.

Kering’s need for change is urgent. The group has lost more than €40 billion in market value since mid-2021. Gucci, once its powerhouse, is faltering, other houses are treading water, and financial pressures have mounted following a wave of acquisitions. In de Meo, Kering hopes to find both strategic discipline and a fresh creative perspective. Though he lacks direct experience in luxury, his turnaround at Renault was a masterclass in focus, execution, and brand revitalization.

The stakes are high. De Meo must restore Gucci’s relevance, stabilize other houses, reduce leverage, and rebuild investor trust. This report evaluates de Meo’s performance at Renault, dissects Kering’s structural challenges, and outlines the strategic levers and risks that will define Kering’s next chapter under his leadership.

Luca de Meo at Renault: A Case Study in Turnaround Execution

Taking Over in Crisis

Luca de Meo joined Renault in July 2020 as the company was reeling from the combined impact of the Carlos Ghosn scandal and the COVID-19 pandemic. With an €8 billion loss in 2020, collapsing margins, and a shaky alliance with Nissan, Renault was on the brink. De Meo responded with “Renaulution,” a sweeping plan to shift Renault from a volume-based strategy to one focused on value and profitability.

Financial and Operational Rebound

Under de Meo’s leadership, Renault went from deep losses to record profitability. By 2024, the company achieved a 7.6% operating margin and €4.3 billion in operating profit. Revenue grew 7.4% year-over-year to €56.2 billion, supported by a refreshed product lineup and a renewed focus on electrification. Renault slashed fixed costs by over €2 billion in two years, lowered break-even volumes, and improved pricing power by avoiding unprofitable channels and excessive discounting.

Importantly, Renault avoided the profit warnings that hit peers during industry downturns in 2023 and 2024. While Volkswagen and Stellantis struggled, Renault delivered consistent results. Between 2020 and 2025, the company’s total shareholder return exceeded 115%, the best among European automakers in that period.

Strategic Brand Restructuring

De Meo reorganized Renault into four focused units: Renault, Dacia, Alpine, and Mobilize. He trimmed overlapping platforms and powertrains, simplified operations, and moved Renault’s namesake brand slightly upmarket. He also reignited Renault’s product narrative by launching the electric Renault 5, a retro-inspired car that leveraged brand heritage while advancing its EV ambitions. The model received widespread acclaim, becoming a symbol of Renault’s rebirth.

In parallel, de Meo transformed Alpine from an obscure sub-brand into a key pillar of Renault’s strategy. He used Formula 1 and performance electric vehicles to elevate Alpine’s image, aligning it with exclusivity and future technology. Sales of the A110 tripled, and the brand's valuation increased significantly.

Pricing, Profitability, and Portfolio Discipline

De Meo implemented strict pricing discipline, limiting fleet sales, reducing unprofitable variants, and aligning production to demand. His emphasis on fewer, better-selling models improved factory utilization and helped Renault weather semiconductor shortages and cost pressures better than peers. He also restructured the Renault-Nissan alliance, lowering cross-shareholdings and securing greater strategic autonomy, enabling Renault to push forward with Ampere, its EV and software spin-off.

Summary of Results

In five years, de Meo turned a bloated, loss-making business into a focused, profitable, and strategically autonomous player. Renault’s share price doubled, its margins reached historic highs, and its product strategy was both emotionally resonant and commercially effective. His leadership style was analytical, brand-savvy, and operationally tough, which made him one of Europe’s most respected turnaround executives.

See Figure 1 for a visual summary of Renault’s revenue performance under de Meo’s leadership.

Kering’s Current Challenges

Luca de Meo takes the reins at a critical juncture. Kering is not just underperforming, it is under pressure from nearly every angle: falling sales, weakening brand equity, executive churn, and mounting financial strain. The group’s reliance on Gucci has become a liability, and recent strategic moves have added debt without delivering clear returns. Below, we break down the most pressing issues he inherits.

Operating margin compression across Kering’s portfolio is summarized in Figure 2.

A Collapsing Valuation

Kering’s market cap has shrunk by more than 60% since its 2021 peak, from over €90 billion to just under €30 billion. Its share price has tumbled from €790 to the €300 range, even as peers like Hermès and LVMH set new highs. This dramatic underperformance is not just cyclical, it also reflects deep concerns about Gucci’s trajectory and the broader group’s lack of a compelling strategy.

Repeated profit warnings and creative misfires have eroded investor confidence. Kering now trades at a discount to its peers, both on earnings and enterprise value multiples. Investors are demanding proof that the company has a viable plan to stabilize, let alone grow. This sharp de-rating offers upside, but only if execution improves materially.

Gucci: From Powerhouse to Problem Child

Gucci once accounted for over half of Kering’s profits. Its meteoric rise between 2015 and 2019, driven by Alessandro Michele’s bold aesthetic, powered the group’s golden age. But since 2020, the brand has lost steam. Michele’s eclectic maximalism grew stale, and his exit in 2022 triggered a creative vacuum.

His successor, Sabato De Sarno, took Gucci in a starkly different direction that was minimalist, classic, and subdued. The result was disappointing. Consumers failed to connect with the collections, and Gucci’s sales dropped 21% in 2024, followed by another 25% in early 2025. In February 2025, De Sarno was replaced by Demna, Balenciaga’s controversial creative director, signaling a dramatic pivot back toward boldness.

Demna’s debut Gucci collection, scheduled for September 2025, is now a critical event. If it fails to spark excitement, Gucci risks entering a prolonged decline. And with Gucci still contributing nearly 45% of group revenue and 60% of profit, its performance will make or break Kering’s results.

Figure 3 illustrates Gucci’s rapid revenue contraction since 2022.

Brand Troubles Beyond Gucci

While Gucci’s performance has dominated headlines, Kering’s broader portfolio presents its own set of complexities:

• Balenciaga suffered a severe PR crisis in 2022 due to a controversial ad campaign. Sales collapsed in key markets like the US and UK, and consumer sentiment remains fragile. Moving Demna to Gucci has left a leadership vacuum that must be addressed quickly.

• Saint Laurent has seen more stability under Francesca Bellettini and Anthony Vaccarello, but growth stalled in 2024, with revenues down 9%. The brand now needs fresh momentum and product innovation to stay competitive.

• Bottega Veneta is the standout exception. Under Matthieu Blazy, it has posted modest growth and maintained its image of understated luxury. But it remains too small (around 10% of sales) to offset Gucci’s decline.

• Alexander McQueen, Brioni, and Kering’s jewelry brands remain subscale. McQueen is undergoing a creative reset; Brioni is perennially unprofitable. None are positioned to drive significant group growth.

Financial Strain and Rising Debt

Kering’s attempt to diversify beyond Gucci has come at a cost. Between 2022 and 2024, it spent nearly €10 billion acquiring Valentino (30% stake), Creed (fragrance), and a series of flagship real estate assets. These moves increased net debt from near zero in 2021 to €10.5 billion by the end of 2024, roughly 3.8x EBITDA.

At a time when operating profit has collapsed (down 46% year-over-year in 2024), this level of leverage is dangerous. Credit rating agencies have flagged the risk of further downgrades if debt continues to rise or earnings don’t recover. Kering’s cost of capital is now higher, and its financial flexibility is constrained. Management has already started selling assets and cutting costs, but the pressure is on to do more.

Kering’s mounting debt burden is shown in Figure 4, underscoring the financial constraints facing any turnaround effort.

Eroding Investor Trust

Kering’s leadership has struggled to communicate a clear path forward. A scheduled analyst day in June 2025 was abruptly cancelled just before de Meo’s appointment was confirmed which was a move that further unsettled the market. Analysts and shareholders want clarity on Gucci’s direction, the fate of recent acquisitions like Valentino, and the company’s approach to debt reduction.

In this context, de Meo steps into a leadership vacuum. He inherits a group that is demoralized internally and discounted externally. But with that comes opportunity: the bar is low, the problems are identifiable, and any signs of progress could be rewarded quickly by the market.

Strategic Turnaround Levers for Kering

With brand and financial pressures mounting, de Meo’s success will hinge on how swiftly and effectively he can activate the following strategic levers. Luca de Meo’s challenge is not just to fix a brand, it is to reboot a luxury group. Drawing on his Renault playbook, he will need to blend operational rigor with creative intuition. The following are the key strategic levers he can deploy.

a. Operational Discipline and Cost Efficiency

One of de Meo’s first tasks will be to instill financial discipline. Kering’s SG&A has grown faster than revenue, and with over €10 billion in net debt, there’s little room for inefficiency. Cost-saving initiatives already underway, including store closures and corporate restructuring that is expected to accelerate under his leadership.

At Renault, de Meo delivered over €2 billion in cost cuts within two years. A scaled version of that ambition could yield hundreds of millions in savings at Kering. Areas for focus include:

• Retail footprint: Gucci’s global expansion in the 2010s left a bloated store network. Rationalizing underperforming locations could boost profitability.

• Corporate overhead: Redundancies across regional offices and support functions are likely targets.

• Procurement and logistics: Consolidating supplier relationships and optimizing production can enhance margins without compromising quality.

Importantly, de Meo brings an industrial mindset to luxury. He is likely to apply lean principles and performance KPIs to areas that have historically operated on instinct rather than metrics. This won’t be easy in a culture that prizes creative freedom, but it’s necessary to rebuild margins and free up cash.

b. Brand Repositioning and Creative Renewal

De Meo’s success will hinge on his ability to help each brand rediscover its voice — especially Gucci. At Renault, he leveraged nostalgia, coherence, and modernity to rejuvenate product lines. He will need to do the same here.

• Gucci: The top priority. The brand must move past the binary of maximalism versus minimalism. Demna’s debut in September 2025 will set the tone, but Gucci needs more than a bold collection, it needs a narrative that re-engages both heritage loyalists and new generations. Reviving icons (Jackie bags, horsebit loafers) with fresh energy, reinvigorating marketing campaigns, and connecting with Gen Z via digital platforms will all be essential.

• Balenciaga: The brand must restore trust, especially in the US. A new creative leader, tighter brand governance, and carefully recalibrated campaigns will be required. De Meo may reposition Balenciaga as slightly more classic to offset reputational damage while preserving its edge.

• Saint Laurent and Bottega Veneta: These two brands offer stable creative leadership. The opportunity here is to accelerate growth through focused investment in retail, in hero products, and potentially in new categories like fine jewelry or home goods.

De Meo has shown an instinct for brand coherence. At Seat and Renault, he championed distinct identities across sub-brands. He will likely push for each Kering house to articulate its positioning more clearly with a combination of fewer mixed messages and more consistent product storytelling.

c. Product Innovation and Merchandising Discipline

Kering’s product engines have been underperforming. Gucci, in particular, has lacked newness. De Meo can drive a shift toward tighter product cycles, more frequent capsule collections, and closer alignment between design and merchandising.

He may also modernize Kering’s approach to product development:

• Data use: Unlike many in luxury, de Meo embraces data analytics. He’s expected to implement tools for tracking sell-through, regional preferences, and pricing elasticity which would allow for more responsive assortment planning.

• Cross-functional collaboration: At Renault, design, engineering, and marketing worked in unison. A similar model at Kering where creative, commercial, and digital teams are better integrated which could improve hit rates and reduce misses.

This doesn’t mean sacrificing creativity. Rather, it means giving creative teams the tools and feedback loops to succeed. If done well, this could bring structure to innovation without stifling it.

d. Strengthening the Customer Experience

De Meo’s fresh perspective can enhance Kering’s client engagement. Luxury is no longer just about product, it’s about experience.

e. Areas ripe for improvement:

• Clienteling and CRM: Personalized outreach, VIP services, and post-purchase experiences need to become more data-driven and consistent across brands.

• E-commerce and omnichannel: Kering’s digital capabilities lag behind LVMH’s. Better integration of online and offline channels, smarter use of customer data, and more immersive digital content can enhance conversion and loyalty.

• Flagship stores as brand theaters: De Meo may champion a shift in store roles from sales-focused to experience-focused. He could invest in immersive storytelling spaces, inspired by automotive showrooms or hospitality environments.

f. Portfolio Optimization

Kering’s current brand portfolio is uneven. De Meo will need to make tough calls.

• Valentino: Kering has a 30% stake, with an option to buy the rest by 2028. De Meo must decide whether to proceed with full acquisition or renegotiate. Given Kering’s debt load and Gucci’s needs, he may favor deferring or restructuring the deal unless Valentino shows strong performance.

• Divestitures: Non-core assets like Brioni or the remaining Puma stake could be sold to raise cash. If Alpine and Ampere were focal points at Renault, de Meo may identify brands within Kering that deserve similar concentrated investment and pare back the rest.

In short, he is expected to conduct a thorough portfolio review: what to grow, what to hold, and what to exit.

Reviving Gucci: The Core Turnaround Plan

More than any other initiative, Kering’s future depends on the successful revival of Gucci. The brand is not only the group’s flagship but also its primary earnings engine. For years, Gucci rode a wave of explosive growth under Alessandro Michele. But since 2020, that momentum has stalled. Luca de Meo’s most visible and urgent mandate is to reverse Gucci’s decline.

Rebuilding Creative Momentum

Gucci’s brand identity has oscillated between extremes: Michele’s eccentric maximalism and De Sarno’s quiet classicism. The result is confusion for customers, for employees, and for investors. Demna’s appointment as creative director in early 2025 is a bold gamble. Known for his provocative work at Balenciaga, Demna brings creative firepower but also baggage.

While not a designer, De Meo’s role is to ensure the creative vision connects clearly with commercial goals. He must:

• Support Demna with clear brand positioning and market feedback

• Monitor early reactions, particularly to Demna’s debut show in September 2025 and be prepared to act decisively if sales don’t respond

• Encourage creative-commercial collaboration to ensure “hero” products emerge from runway ideas

• Possibly empower merchandising leaders or bring in additional talent to balance Demna’s more avant-garde instincts with commercially viable outputs

In essence, De Meo must act as the CEO of a creative enterprise that enables bold ideas while ensuring financial relevance.

Re-Elevating Brand Perception

A key issue with Gucci in recent years has been its erosion of exclusivity. The brand became overly reliant on aspirational consumers and suffered from ubiquity fatigue. De Meo is expected to restore Gucci’s luxury positioning by:

• Focusing on top-tier clients through made-to-order, high jewelry, and exclusive capsule programs

• Tightening distribution to reduce overexposure and improve scarcity value

• Investing in craftsmanship and heritage storytelling to re-anchor Gucci in tradition while modernizing its expression

This mirrors his work at Renault, where he moved the brand slightly upmarket and reconnected with cultural meaning through products like the R5 EV.

Pricing and Product Architecture

Gucci, like many luxury brands, pushed prices aggressively during the post-COVID boom. That strategy may have reached its limit. De Meo may look to rebalance:

• Avoiding further broad price hikes that alienate core customers

• Introducing new entry points such as smaller leather goods or accessories to re-engage younger and aspirational shoppers

• Increasing product cadence with more frequent drops, seasonal refreshes, and limited editions to maintain buzz

This approach mimics the auto industry’s product lifecycle management, where continuous updates keep models fresh between major redesigns.

Reclaiming Youth and Cultural Relevance

Gucci was once at the forefront of digital luxury when it was pioneering campaigns on Instagram, investing in metaverse experiments, and collaborating with pop culture icons. Recently, it has fallen behind competitors like Dior and Louis Vuitton.

De Meo, while not from fashion, understands cultural branding. At Seat and Alpine, he used motorsport, lifestyle positioning, and digital touchpoints to engage younger audiences. At Gucci, similar principles apply:

• Partnering with musicians, artists, or creators who resonate with Gen Z

• Revitalizing Gucci’s digital marketing with distinctive, culturally relevant campaigns

• Leveraging e-commerce platforms and content-rich formats to tell stories beyond just product shots

Ultimately, Gucci must feel “important” again to tastemakers. That can’t be achieved through logos alone, it requires cultural fluency which is something De Meo is seen as capable of fostering through collaboration.

Leadership, Culture, and Organizational Alignment

Beyond operational fixes, de Meo must unify a sprawling organization under a shared vision. This will require both personnel changes and cultural realignment to enable faster decision-making and clearer accountability. This model worked during Gucci’s boom years but has struggled under pressure. De Meo is expected to bring more centralized alignment, accountability, and strategic discipline without compromising creativity.

A New Governance Model

François-Henri Pinault remains as chairman, but he has made clear that de Meo has full operational control. This separation of roles is new for Kering and intended to give the CEO the authority to make difficult decisions, including talent changes, portfolio rebalancing, and structural reforms.

Early reports suggest de Meo will evaluate the current leadership across all brands. With Francesca Bellettini (CEO of Saint Laurent) and Jean-Marc Duplaix (CFO) already appointed as deputy CEOs, he has experienced lieutenants in place. Their roles may expand to cover performance monitoring and cross-brand initiatives.

We can expect the following:

• Tighter performance management: Regular reviews of brand KPIs, clearer budget accountability, and a sharper focus on ROI across functions

• Cross-brand coordination: Sharing best practices in merchandising, supply chain, and digital operations

• Stronger central oversight: While not undermining creative independence, Kering HQ under de Meo may take a more active role in steering strategic priorities and capital allocation

This mirrors de Meo’s approach at Renault, where he created separate brand units but maintained tight strategic control.

Building a Cohesive Culture

De Meo’s leadership style is known for being both demanding and empathetic. At Renault, he earned respect by engaging directly with employees during restructurings and by articulating a shared mission. At Kering, he faces a different kind of challenge: bringing together creative leaders, corporate managers, and family stakeholders into a unified vision.

Some cultural shifts he may push:

• From intuition to insight: Encouraging the use of data, not just gut feeling, to drive decisions mainly in merchandising and planning

• From independence to interdependence: Promoting collaboration across brands and functions rather than siloed excellence

• From top-down to transparent: Enhancing internal communication, so that Kering’s 47,000 employees understand the strategy and their role in it

To symbolize change, de Meo may host town halls, institute new planning cycles, or appoint a chief transformation officer. His charisma and storytelling ability cited often by colleagues could help galvanize the organization during what will be a demanding transition.

Managing the Family Dynamic

As a family-controlled business, Kering’s governance must also accommodate the interests of its principal shareholder, Artemis. While Pinault has pledged not to interfere, the family remains a powerful voice. Their financial exposure (especially with Artemis’s own leverage after recent acquisitions) means they may be sensitive to dividend reductions or dilution.

De Meo will need to navigate this dynamic carefully. Open communication with Pinault and Artemis, as well as regular updates on financial health and turnaround milestones, will be essential. Striking the balance between independence and alignment will define how much leeway he ultimately has in reshaping the group.

Precedent Case Studies: When Outsiders Revive Luxury

Luca de Meo’s appointment as CEO of Kering represents a decisive shift away from legacy leadership and toward a more performance-driven, external approach. While bold, this move is not without precedent in the European luxury fashion sector. Several notable companies have successfully transitioned from family-led to professionally managed structures during periods of brand fatigue or financial strain, resulting in significant turnarounds in both brand equity and shareholder value. These case studies offer encouraging parallels that help contextualize de Meo’s mandate.

One of the most well-known examples is Gucci in the 1990s. At that time, the brand was faltering due to overexposure, diluted licensing, and internal family disputes. When the Gucci family exited, Domenico De Sole was brought in as CEO. An outsider to the family, De Sole partnered with Tom Ford and launched a sweeping overhaul of the business. Licensing was brought back in-house, product quality improved, and a new creative direction ignited excitement across the market. Within five years, Gucci’s valuation soared from $400 million to $8 billion, setting a gold standard for brand reinvention and delivering extraordinary value creation.

Salvatore Ferragamo followed a similar trajectory. In 2006, the family hired Michele Norsa as its first non-family CEO. Tasked with modernizing a brand seen as traditional and overly conservative, Norsa refreshed the product line, repositioned the brand to appeal to younger consumers, and led a successful IPO in 2011. The proceeds funded rapid expansion, particularly in Asia, and helped Ferragamo double its share price in the years that followed. Under his leadership, the company reached record revenues and profits while maintaining its heritage of craftsmanship.

Fendi also benefited from external leadership after a period of stagnation. Following its partial acquisition by LVMH, the brand was still unprofitable and overly reliant on a single product, the Baguette handbag. LVMH installed Michael Burke, a seasoned executive, to lead a professional overhaul. The company streamlined operations, diversified its product offerings, and modernized its marketing and retail strategy. Within a few years, Fendi returned to profitability and eventually crossed the $1 billion annual revenue mark, establishing itself as a cornerstone of LVMH’s fashion portfolio.

These examples share several key themes. External leaders brought in sharper financial discipline, a focus on brand coherence, and a willingness to make tough decisions that internal management often hesitated to confront. They demonstrated that legacy does not guarantee longevity, and that brand equity can be rebuilt with the right combination of creative renewal and operational clarity. In each case, the companies emerged stronger, more focused, and better positioned to compete globally.

Kering’s current situation bears a striking resemblance to these past transitions. With multiple brands in flux, particularly Gucci, and investor confidence in need of restoration, Luca de Meo enters with both a challenge and an opportunity. These historical examples suggest that external leadership, when empowered and strategically minded, can unlock substantial value in even the most tradition-bound luxury houses. De Meo’s tenure will ultimately be judged by execution, but precedent shows that the bet on an outsider has paid off before and could pay off again.

Risks, Market Conditions, and Execution Challenges

Despite Luca de Meo’s strong track record, the road ahead is filled with uncertainties. Luxury turnarounds are inherently complex, and Kering’s situation comes with a set of risks that could derail progress if not managed carefully.

a. Industry Inexperience

De Meo has never led a fashion or luxury house. While his marketing instincts and product sense are strong, luxury operates on a different wavelength than automotive, it’s less about engineering precision and more about emotion, exclusivity, and creative alchemy.

There’s a learning curve: understanding the rhythm of fashion seasons, the nuances of design leadership, and the intangible factors that drive desirability. De Meo will rely heavily on his deputies and brand CEOs to fill this gap. If he overreaches or misreads creative dynamics, especially at Gucci, he could alienate teams or miss early warning signs.

Still, there is precedent for outsiders succeeding in luxury. Robert Polet (ex-Unilever) led Gucci Group through a successful run in the 2000s, and Leena Nair (another Unilever alum) is now leading Chanel. What matters is whether de Meo listens, adapts, and empowers the right talent.

b. Internal Resistance and Integration Complexity

Kering has long operated on a decentralized model that gave creative directors and brand heads significant autonomy. Shifting this culture toward a more performance-driven and collaborative structure may provoke resistance from longtime insiders who are wary of “corporate” oversight.

Morale could suffer if changes are abrupt or if de Meo is perceived as a cost-cutter rather than a brand builder. At Renault, he balanced this by communicating openly and celebrating wins. At Kering, where identity and artistry matter more than spreadsheets, he’ll need to earn trust while still driving accountability.

Organizational change also takes time. Aligning KPIs, revamping processes, and embedding new norms across a global workforce will require careful sequencing and change management.

c. Macro and Market Headwinds

Even the best strategy can be undermined by weak external demand. The global luxury market has slowed since its post-pandemic surge, especially in key regions:

• China: Still recovering from economic uncertainty, with mixed consumer sentiment. Gucci is heavily exposed to this market.

• United States: Aspirational consumers have pulled back due to inflation and rising interest rates, hitting brands like Gucci and Balenciaga hardest.

• Europe and Middle East: Travel-driven sales have returned, but macro pressures (war, inflation, energy costs) continue to weigh on growth.

Currency volatility, geopolitical tensions, and potential regulatory risks (e.g., tariffs on European luxury exports) also add layers of uncertainty.

In short, even if Kering executes well, the broader market may not cooperate. This could delay visible progress and test investor patience.

d. Execution Risk and Turnaround Timelines

Perhaps the biggest challenge is managing the complexity and timing of change. De Meo must juggle:

• Gucci’s brand overhaul

• Balenciaga’s image recovery

• Integration of acquisitions like Valentino and Creed

• Group-level cost savings and debt reduction

• Cultural and structural reform within Kering

Each of these initiatives has dependencies for example, cost savings may free up capital for brand investment, but cutting too deeply could hinder innovation. And some projects, like creative repositioning, may take 12–18 months to bear fruit. If early results disappoint, market support could fade.

Investors will expect tangible milestones: stabilizing Gucci sales, margin improvement, and visible debt reduction. If those don’t materialize by mid-to-late 2026, sentiment could turn.

There’s also competitive pressure. LVMH, Hermès, and Chanel continue to gain share and attract top creative and commercial talent. Even with the right moves, Kering is playing catch-up.

Investment Case

Current Position

Kering’s financial metrics underscore the urgency of its turnaround. In 2024, revenue declined 12% to €17.2 billion, erasing years of growth. Operating profit dropped nearly 50% to €2.74 billion, and margins contracted to 13.4%, less than half their 2019 peak and far below peers like Hermès (above 40%) and LVMH (mid-20s).

Gucci’s revenue alone fell from €10.5 billion in 2022 to €7.7 billion in 2024 which is a staggering decline for what was once the engine of group performance. Meanwhile, Saint Laurent and Bottega Veneta generated €2.9 billion and €1.7 billion, respectively, offering some stability but not enough to offset Gucci’s drop.

Debt and Cash Flow Constraints

Kering’s net debt rose to €10.5 billion by the end of 2024, a sharp increase from near-zero in 2021. Its net debt-to-EBITDA ratio stands near 4x, approaching levels that could trigger credit rating downgrades. Free cash flow, at €1.4 billion, barely covers dividends and interest payments.

To shore up liquidity, Kering is selling real estate and reassessing capital commitments. But a key overhang remains: the optional full acquisition of Valentino, which could cost €4 billion as early as 2026. Without a rebound in earnings, financing that purchase could require more debt or equity that neither of which investors favor.

Market Reaction to de Meo’s Appointment

The market responded positively to the announcement of Luca de Meo as CEO. Kering shares rose nearly 12% in a single day which is their best performance since 2008, adding €4 billion in market cap. This reaction reflects a reset in expectations and recognition of de Meo’s turnaround credentials.

However, sentiment remains cautious. Kering trades at around 14–15x forward earnings, significantly below Hermès (~40x) and LVMH (~22x). The market is in “wait and see” mode, looking for signs that the new CEO can deliver.

Potential Valuation Upside

The upside case is compelling, if de Meo succeeds. Several scenarios could re-rate Kering’s valuation:

• Margin Recovery: Raising group EBIT margins from 13% toward 20% would add over €1 billion in operating profit. At a conservative 15x multiple, that’s €15 billion in enterprise value upside.

• Revenue Growth Reignition: If Gucci rebounds to €10 billion in sales and other brands grow modestly, total revenue could exceed €20 billion by 2026. With operating leverage, EBIT could surpass €4 billion again.

• Multiple Expansion: If investor confidence returns and Kering trades at 18–20x forward earnings making it closer to LVMH’s levels, the stock could rise 30–40% even without major earnings upgrades.

• Portfolio Moves: Strategic divestitures or a successful Valentino integration could unlock value. A partial IPO of a brand (as Moncler did with Stone Island) or a stake sale in non-core assets could also support deleveraging.

These are not guaranteed, but they illustrate how much embedded value exists if execution improves.

Key Milestones to Watch

Investors should monitor the following in the next 12–18 months:

• Gucci’s September 2025 Collection: Demna’s debut will be a bellwether for the brand’s creative direction. Strong critical reception and early sales momentum could shift sentiment quickly.

• Margin Trends: Any improvement in operating margins, even modest would show that cost controls are taking effect.

• Debt Reduction: Asset sales and better cash generation should begin to bring net debt down. A move below 3x EBITDA would ease balance sheet concerns.

• Leadership Actions: Management changes, strategic reviews, and capital allocation updates will indicate whether de Meo is asserting control and moving with urgency.

Conclusion

Kering’s decision to appoint Luca de Meo marks a pivotal reset, a bold move to break from a period of stagnation by placing a proven corporate strategist at the helm of a struggling luxury empire. The scale of the task is significant: Gucci is in creative disarray, key brands face reputational and structural hurdles, and the balance sheet has grown increasingly leveraged. However, the size of the opportunity is equally compelling. If de Meo can deliver a multi-year turnaround, even partially, the upside potential for Kering’s valuation is substantial.

At current trading levels, Kering is priced for disappointment. Its valuation multiples remain well below sector peers, its margins have halved from prior peaks, and market sentiment reflects skepticism over the company’s ability to reclaim growth and relevance. Yet the appointment of de Meo has changed the narrative’s trajectory. His arrival has catalyzed renewed investor interest, and early signs including stock reaction and stakeholder endorsement which suggest the market is willing to give him the benefit of the doubt, at least initially.

Importantly, this is no longer a luxury growth compounder like Hermès or LVMH. It is a turnaround story, with all the risks and rewards that implies. Investors should not expect a smooth or linear recovery. Instead, the next 12 to 18 months will likely bring volatility, as operational changes unfold, creative risks play out, and consumer reception to new strategies becomes clear. The path to value creation will depend on de Meo’s ability to stabilize Gucci, trim excess, reinvigorate brand equity, and reduce debt, all while navigating a tricky macroeconomic backdrop and maintaining Kering’s cultural integrity.

From an investment lens, Kering resembles a contrarian, high-upside equity. This is not a defensive luxury stock for the risk-averse; rather, it is a strategically discounted asset with embedded optionality. If Gucci stabilizes and margins begin to recover, even modestly, there is room for material multiple expansion. Deleveraging efforts, brand recalibration, and potential revisions to acquisition plans, such as delaying or restructuring the Valentino deal, could further reduce risk. In this context, Kering’s depressed valuation offers a compelling entry point for investors seeking long-duration returns.

However, execution risk remains high. Failure to reignite Gucci or missteps in managing creative leadership could extend the company’s underperformance and prolong investor skepticism. Likewise, a misalignment with the Pinault family or the inability to trim debt fast enough could erode strategic flexibility. These are not minor concerns and should temper position sizing accordingly.

In sum, Kering under Luca de Meo represents a rare chance to buy into a top-tier luxury group at a meaningful discount to intrinsic value. For investors with a multi-year horizon and the willingness to withstand near-term turbulence, the bet is straightforward: that de Meo’s disciplined execution, paired with bold but thoughtful brand strategy, can restore the luster to one of fashion’s most storied groups. The coming quarters will determine whether this becomes one of luxury’s great turnarounds or simply a missed opportunity delayed by hesitation.

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