Kering's Strategic Direction Under New Leadership: Assessing Long-Term Value Creation and Market Positioning

The luxury sector is undergoing a period of profound recalibration, and Kering's recent leadership overhaul—marked by the appointment of Luca de Meo as CEO—has thrust the French conglomerate into the spotlight. As the group navigates declining sales, brand repositioning, and sustainability imperatives, investors are scrutinizing whether de Meo's automotive-industry pedigree and Kering's strategic shifts can rekindle long-term value creation.

A Leadership Shift with High Stakes

Kering's decision to separate the roles of Chairman and CEO—François-Henri Pinault stepping down from the latter—reflects a governance modernization effort typical of large public companies Kering unveils its first dedicated water strategy for a net positive impact by 2050, [https://www.kering.com/en/news/kering-unveils-its-first-dedicated-water-strategy-for-a-net-positive-impact-by-2050/]^[1]. De Meo, a Renault veteran known for steering the automaker through electrification and partnership overhauls, brings a cross-industry perspective to a sector historically resistant to disruption Kering: Luca de Meo promises swift, “clear and strong” choices to streamline and reposition certain brands within the luxury group., [https://fashionunited.uk/news/business/kering-luca-de-meo-promises-swift-clear-and-strong-choices-to-streamline-reorganise-reposition-certain-brands/2025090983830]^[4]. His appointment follows a 16% revenue decline in Kering's first half of 2025, driven largely by struggles at Gucci, Saint Laurent, and Balenciaga First-half 2025 Results, [https://www.kering.com/en/news/first-half-2025-results-072925/]^[5].

De Meo's immediate priorities include streamlining operations, deleveraging the balance sheet, and repositioning underperforming brands Kering: Luca de Meo promises swift, “clear and strong” choices to streamline and reposition certain brands within the luxury group., [https://fashionunited.uk/news/business/kering-luca-de-meo-promises-swift-clear-and-strong-choices-to-streamline-reorganise-reposition-certain-brands/2025090983830]^[4]. This aligns with broader industry trends: luxury firms are increasingly prioritizing agility and cost discipline amid macroeconomic headwinds and shifting consumer preferences The State of luxury goods in 2025, [https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury]^[2]. However, the challenge lies in balancing operational rigor with the intangible qualities—craftsmanship, exclusivity—that define luxury.

Sustainability as a Strategic Pillar

Kering's sustainability strategy remains a cornerstone of its long-term vision, with the recent Water-Positive Strategy aiming for a net positive water impact by 2050 Kering unveils its first dedicated water strategy for a net positive impact by 2050, [https://www.kering.com/en/news/kering-unveils-its-first-dedicated-water-strategy-for-a-net-positive-impact-by-2050/]^[1]. This builds on earlier goals, such as reducing environmental impact by 40% by 2025, and positions the group as a leader in ESG (environmental, social, and governance) integration within luxury The State of luxury goods in 2025, [https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury]^[2]. The Climate-Nature-Water nexus approach—focusing on 10 key water basins—demonstrates a shift from abstract sustainability pledges to localized, measurable action Kering unveils its first dedicated water strategy for a net positive impact by 2050, [https://www.kering.com/en/news/kering-unveils-its-first-dedicated-water-strategy-for-a-net-positive-impact-by-2050/]^[1].

Investors should note that ESG performance is increasingly tied to financial resilience. Kering's sustainability initiatives have earned it top ESG ratings, a differentiator in a sector where consumers and regulators demand transparency The State of luxury goods in 2025, [https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury]^[2]. However, the cost of these programs—ranging from sustainable material R&D to circular economy investments—could strain margins in the short term, particularly as the group grapples with debt reduction targets First-half 2025 Results, [https://www.kering.com/en/news/first-half-2025-results-072925/]^[5].

Market Reactions and Competitive Dynamics

The market's response to Kering's leadership changes has been mixed. While de Meo's appointment initially spurred a 33% surge in Kering's shares, short sellers have since increased bets against the stock, citing skepticism over Gucci's turnaround prospects Kering unveils its first dedicated water strategy for a net positive impact by 2050, [https://www.kering.com/en/news/kering-unveils-its-first-dedicated-water-strategy-for-a-net-positive-impact-by-2050/]^[1]. This tension underscores the high stakes of de Meo's mandate: Gucci's 26% revenue decline in 2025 highlights the urgency of restoring the brand's appeal, particularly in China and North America First-half 2025 Results, [https://www.kering.com/en/news/first-half-2025-results-072925/]^[5].

Competitors like LVMH and Hermès, which have maintained more stable growth trajectories, serve as benchmarks. LVMH's focus on expanding its portfolio of “winning” brands and leveraging digital commerce contrasts with Kering's bet on radical repositioning The State of luxury goods in 2025, [https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury]^[2]. Meanwhile, Hermès' success with niche, high-margin products (e.g., the Birkin bag) illustrates the enduring power of exclusivity—a lesson Kering must heed as it streamlines its offerings The State of Fashion: Luxury | BoF, [https://www.businessoffashion.com/reports/state-of-luxury-fashion-industry/]^[3].

Strategic Risks and Opportunities

De Meo's automotive background suggests a bias toward bold, systemic overhauls. At Renault, he prioritized electrification and supply-chain efficiency; at Kering, similar logic could translate to digitizing client engagement or accelerating the adoption of AI-driven personalization The State of luxury goods in 2025, [https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury]^[2]. However, the luxury sector's reliance on human craftsmanship and emotional value complicates such approaches.

A critical risk lies in overcorrecting. While Kering has announced plans to close 80 stores by 2025, excessive cost-cutting could erode brand equity. Conversely, underinvestment in innovation—particularly in sustainable materials—could leave Kering vulnerable to regulatory shifts and consumer backlash Kering unveils its first dedicated water strategy for a net positive impact by 2050, [https://www.kering.com/en/news/kering-unveils-its-first-dedicated-water-strategy-for-a-net-positive-impact-by-2050/]^[1].

Conclusion: A Make-or-Break Transition

Kering's strategic direction under de Meo hinges on three pillars: operational discipline, sustainability leadership, and brand revitalization. The group's ability to balance these priorities will determine whether it emerges as a sector leader or cedes ground to rivals. For investors, the key metrics to watch include Gucci's recovery trajectory, ESG performance against 2025 targets, and Kering's debt-to-EBITDA ratio as it executes its deleveraging plan First-half 2025 Results, [https://www.kering.com/en/news/first-half-2025-results-072925/]^[5].

In a luxury market increasingly defined by polarization—where “winners” outperform “laggards” by widening margins—Kering's success will depend not just on de Meo's vision, but on its capacity to marry industrial efficiency with the timeless allure of luxury The State of Fashion: Luxury | BoF, [https://www.businessoffashion.com/reports/state-of-luxury-fashion-industry/]^[3].