Kering's High-Stakes Bet: Can Strategic Overhaul Revive the Luxury Titan?

Kering, the French luxury conglomerate, has embarked on a bold strategic revival in 2025 to reclaim its position as a leader in a fragmented global luxury market. With Gucci's sales collapsing by 25% in Q1 2025 and the group's share price plummeting 70% since 2022, the stakes for Kering's leadership changes and brand reinvention are nothing short of existential. This article evaluates whether the company's dual pivot—operational rigor under CEO Luca de Meo and creative reinvention under Demna Gvasalia—can restore long-term shareholder value.

Leadership Shift: From Artistry to Accountability

Kering's first-half 2025 financial results ($7.59 billion revenue, -16% YoY) exposed a luxury sector grappling with softening demand, particularly in Asia-Pacific and North America. The appointment of Luca de Meo, a former Renault CEO known for his “Renaulution” cost-cutting playbook, signaled a departure from the Pinault family's creative-centric governance. De Meo's automotive-sector experience—streamlining supply chains, reducing debt, and optimizing real estate—has already spurred aggressive moves: closing 25 underperforming stores, divesting $1.3 billion in real estate, and targeting a 40% reduction in greenhouse gas emissions by 2035.

While these measures have stabilized the balance sheet (free cash flow of €2.4 billion in H1 2025), the market remains skeptical. Kering's EBIT margin of 12.8% lags behind LVMH's 25% and Richemont's 18%, raising questions about whether de Meo's industrial efficiency can coexist with the artistry that defines luxury.

Brand Revitalization: Demna's Gamble at Gucci

The most critical lever in Kering's turnaround is Gucci's relaunch under Demna Gvasalia, who previously transformed Balenciaga into a $10 billion brand. Gvasalia's Q4 2025 collections prioritize utilitarian minimalism and regenerative materials, a stark contrast to Alessandro Michele's maximalist aesthetic. Early indicators are mixed: while Gucci's Softbit handbag line generated buzz, wholesale revenue fell 33% in Q1 2025.

The success of Gvasalia's vision hinges on his ability to balance heritage with modernity. Gucci's 60% reliance on leather goods and accessories—segments that underperformed in 2025—requires a cultural reset. If Gvasalia can rekindle emotional connections with Gen Z (60% of whom prioritize sustainability), Gucci could recapture its 2010s-era dominance.

Digital and Sustainability as Growth Engines

Kering's digital transformation, including AI-driven personalization and AR try-ons, has already boosted e-commerce conversions by 30% for Bottega Veneta. The group's 2025 goal of 20% digital sales (up from 10% in 2024) positions it to capitalize on Gen Z's $1.4 trillion purchasing power. Meanwhile, sustainability is no longer a cost center but a revenue driver: Kering's 5% stake in Vestiaire Collective and partnerships with circular economy startups have offset Gucci's decline.

Shareholder Value: A Long-Term Play

Despite Kering's 2025 challenges, its diversified portfolio offers resilience. Bottega Veneta's 4% revenue growth and Kering Beauté's 6% increase (led by Creed) suggest untapped potential. The group's beauty division, projected to reach €1 billion in revenue by 2027, could become a high-margin offset for Gucci's struggles.

However, risks persist. The 15% U.S. tariff on European luxury goods and China's economic slowdown threaten further margin compression. For Kering to deliver 15–20% EBIT margins by 2027, Gucci's turnaround must accelerate.

Investment Thesis: Patience with Precision

Kering's stock, trading at a 40% discount to its 2022 peak, presents a speculative opportunity for long-term investors. Key catalysts to monitor:
1. Gucci's Q4 2025 performance under Gvasalia's “see-now, buy-now” strategy.
2. De Meo's debt reduction (€9.5 billion net debt in H1 2025).
3. Digital and sustainability ROI, particularly in the U.S. and Saudi Arabia.

A 30% rebound by 2027 is plausible if Gucci's relaunch succeeds and Kering's digital initiatives gain traction. However, short-term volatility is inevitable. Investors should allocate cautiously, treating Kering as a high-conviction bet on the future of sustainable, digitally integrated luxury.

In conclusion, Kering's strategic overhaul is a high-stakes gamble. While de Meo and Gvasalia's combined expertise offers a path to revival, the luxury market's capricious nature demands vigilance. For those willing to endure short-term pain, Kering's long-term potential remains undervalued.