Analysis: After tackling Kering's debt problems, de Meo faces the Gucci challenge
14/04/2026 06:00
Kering holds capital markets day on Thursday, April 16 Tuesday's Q1 update eyed for early signs of Gucci recovery De Meo has steadied finances, but must deliver Gucci turnaround By Tassilo Hummel MILAN, April 14 (Reuters) - Seven months into the job, Luca de Meo has bought himself time as CEO of Gucci owner Kering PRTP.PA. This week he has to prove he knows how to use it. Since taking over in September, the former boss of carmaker Renault RENA.PA has moved fast: selling assets to shore up Kering's balance sheet, forging new alliances and surrounding himself with fellow auto veterans to drive change. For investors, the emphasis is now shifting to a more complex task: reviving growth at star brand Gucci, the French luxury conglomerate's former cash machine and its most pressing unresolved problem. That challenge has been complicated by a worsening business backdrop due to the Iran war, highlighted by subdued first-quarter sales at rival LVMH LVMH.PA. Kering reports quarterly sales on Tuesday, two days before Meo takes centre stage at his first capital markets day in Florence, Gucci's birthplace. "Investor focus will simply be Gucci, Gucci, Gucci," said Bassel Choughari, a portfolio manager at Comgest. BUYING TIME De Meo joined Kering with a reputation forged outside luxury, having rebuilt Renault by simplifying strategy, tightening discipline and cutting through corporate clutter. He has followed a similar script at Kering. Within weeks, he hit the brakes on the planned acquisition of Italian fashion brand Valentino. He also struck a 4-billion-euro agreement to sell Kering's entire beauty business to L'Oreal and raised roughly 1.5 billion euros by selling high-end real estate in New York and Milan, easing concerns the group could buckle under its debt load. Those moves have put Kering on firmer financial footing and shifted the conversation. With liquidity secured and leverage less of a worry, the spotlight is back where it has always been: Gucci. Once the group's profit engine, the brand's sales have nearly halved from their peak under former creative director Alessandro Michele. Years of aggressive price hikes, shifting aesthetics and managerial churn have alienated parts of its customer base. LESS AUTONOMY, LESS MYSTIQUE Part of de Meo's answer has been to challenge long-held assumptions inside Kering. He has questioned the group's historical over-reliance on Gucci and acknowledged that errors in its pricing strategy needed correcting. The Italian - who told staffers at a tech event in January he could run an entire company with just a smartphone and WhatsApp - has also tightened control from Paris headquarters, reducing the autonomy long enjoyed by Kering's individual houses, including Yves Saint Laurent and Balenciaga. Marketing and supply chains are being more closely integrated, a move aimed as much at saving costs as restoring coherence. To drive the shift, de Meo has installed several trusted lieutenants from the car industry - many of them Renault alumni - across functions from production and talent management to investor relations and artificial intelligence. For a luxury group long steeped in creative mystique, it marks a cultural jolt. "The level of bullshit has decreased," de Meo told journalists in February, describing his first months. GUCCI, REINVENTED AGAIN That candour has appealed to investors. Kering shares have risen about 13% since his arrival, outperforming a decline in rivals LVMH LVMH.PA and Hermes HRMS.PA over the same period, even as those competitors reported much stronger sales. Expectations, in other words, have lifted - but from a low base. The financial damage is clear. Kering slumped to a 29 million euro net loss from continuing operations last year, versus a profit peak of 3.6 billion euros in 2022. Its recurring operating margin was just 11%, against a peak of 28% in 2021. Fixing that, however, does not rest on de Meo alone. Much also depends on Demna, Gucci's new creative director. Since replacing Sabato de Sarno - who himself lasted less than two years - the Georgian designer has unveiled two collections, marked by deliberately exaggerated, attention-grabbing styles that have split critics. Those designs are only now reaching stores, meaning hard sales data remains scarce, with first-quarter figures likely complicated by the Iran war and fragile consumer confidence. De Meo's task on Thursday will be to persuade investors that even if the turnaround is not yet visible, it is taking shape. ($1 = 0.8545 euros) Kering outperformed rivals since de Meo took over https://www.reuters.com/graphics/KERING-STRATEGY/myvmyjbewvr/chart.png Gucci sales have almost halved in four years https://www.reuters.com/graphics/KERING-STRATEGY/klpylmqymvg/chart.png (Reporting by Tassilo Hummel. Editing by Lisa Jucca and Mark Potter) ((tassilo.hummel@thomsonreuters.com))