Is Kering's Share Price Rally a Sustainable Turnaround Signal?

The luxury sector has long been a playground for high-stakes bets, and Kering’s recent 33% share price rally following Luca de Meo’s appointment as CEO has ignited both optimism and skepticism. Is this a genuine turnaround signal, or a fleeting market reaction to a high-profile name? Let’s dissect the catalysts—leadership transition and strategic restructuring—and weigh their potential to sustain Kering’s recovery.

Leadership Transition: A High-Stakes Bet on Automotive Expertise

Luca de Meo’s arrival marks a radical departure from Kering’s traditional luxury playbook. The former Renault CEO, known for his “cutting-edge” restructuring at the automaker, inherits a company with €10.5 billion in net debt and a 60% share price slump over two years [1]. His automotive background—a sector defined by operational rigor—could be a double-edged sword. On one hand, de Meo’s track record of slashing costs and streamlining operations (e.g., Renault’s €2 billion annual savings under his tenure) suggests he’s equipped to tackle Kering’s bloated cost base [4]. On the other, the luxury industry’s reliance on brand mystique and creative agility may clash with his efficiency-driven mindset.

The market’s initial euphoria, however, was palpable. Within days of his June 16 appointment, Kering’s shares surged 33%, reflecting investor faith in de Meo’s ability to replicate his Renault success [1]. Yet, short sellers quickly pounced, driving short interest to 10.7% of the free float—a 10-year high—highlighting lingering doubts about his capacity to revive Gucci’s flagging sales and Kering’s broader financial health [2].

Strategic Restructuring: Real Estate Sales and Cost-Cutting as Immediate Wins

Kering’s restructuring efforts have already begun to materialize. The sale of a 60% stake in three prime Parisian properties—home to Boucheron, Valentino, and Balenciaga—for $861 million to Ardian is a textbook example of asset-light strategy [1]. This move not only generates immediate liquidity but also allows Kering to retain a 40% stake in these iconic locations, ensuring continued brand visibility without the burden of ownership.

Cost-cutting measures are equally aggressive. The company plans to close 80 stores by year-end and dispose of more real estate holdings, signaling a shift toward leaner operations [1]. These steps are critical given Kering’s first-half 2025 results: a 16% revenue drop and a 39% EBIT decline to €969 million [3]. While such austerity may alienate some stakeholders, it aligns with de Meo’s reputation as a “cut man” focused on operational efficiency [4].

Debt Management and Brand Revitalization: The Long Game

Kering’s debt load remains a ticking time bomb. With a debt-to-EBITDA ratio projected to hit 4.0x in 2025—well above LVMH’s 1.3x—S&P Global has downgraded its credit outlook to “negative” [4]. De Meo’s ability to reduce leverage will hinge on two factors: free cash flow generation and brand-specific initiatives.

Gucci’s recent product refresh, including the successful launch of the Giglio bag, offers a glimmer of hope. The brand’s 26% revenue decline in H1 2025 (on a comparable basis) contrasts with Balenciaga’s resilience and the Jewelry Houses’ steady performance [3]. However, Gucci’s struggles—driven by oversupply of carryover items and waning Chinese demand—remain a drag. The appointment of Demna as creative director is a bold bet on innovation, but creative overhauls take time to translate into sales.

Industry Comparisons and Expert Skepticism

Kering’s strategy mirrors broader luxury sector trends. The sale of real estate assets reflects a shift toward optimizing prime locations while reducing operational complexity—a playbook LVMH and Hermès have mastered [1]. However, Kering’s focus on a smaller number of brands (vs. LVMH’s 75+) exposes it to greater volatility.

Analysts remain divided. Some, like Jacques-Olivier Chauvin, argue that de Meo’s automotive experience could inject much-needed discipline into Kering’s operations [3]. Others caution that the luxury market’s cyclical nature and Kering’s entrenched debt challenges may limit the CEO’s impact. The recent 5% share price rebound in July 2025, despite weak Q2 results, suggests the market is betting on de Meo’s long-term vision [5].

Conclusion: A Rally Built on Hope, Not Yet Proof

Kering’s share price surge is a vote of confidence in de Meo’s leadership and the restructuring roadmap. Yet, sustainability hinges on execution. The CEO must balance cost-cutting with brand vitality, navigate China’s market slump, and reduce debt without stifling innovation. While the initial moves—real estate sales, store closures, and Gucci’s product refresh—are promising, the jury is still out on whether these steps will translate into durable growth.

For now, the rally reflects hope more than hard evidence. Investors should monitor Kering’s Q4 2025 results, de Meo’s first full-quarter report card, and the trajectory of its CDS spreads. If the CEO can stabilize Gucci, curb debt, and reinvigorate brand equity, this rally could mark the start of a sustainable turnaround. But until then, the luxury of optimism comes with a healthy dose of risk.

**Source:[1] Short Sellers Pile Pressure on Kering's Incoming CEO | BoF [https://www.businessoffashion.com/news/luxury/short-sellers-pile-pressure-on-kerings-incoming-ceo/][2] As short sellers circle, Kering bets on new CEO to rebuild confidence [https://us.fashionnetwork.com/news/As-short-sellers-circle-kering-bets-on-new-ceo-to-rebuild-confidence,1762293.html][3] First-half 2025 Results [https://www.kering.com/en/news/first-half-2025-results-072925/][4] Kering outlook revised to negative by S&P on weaker metrics [https://www.investing.com/news/stock-market-news/kering-outlook-revised-to-negative-by-sp-on-weaker-metrics-93CH-4182964][5] Kering shares rise as market looks past a weak second ... [https://www.reuters.com/business/kering-shares-rise-market-looks-past-weak-second-quarter-2025-07-30/]