Luca de Meo's Automotive Turnaround Tactics: Can They Revive Kering's Luxury Empire?

The luxury goods sector is at a crossroads. Declining sales, shifting consumer preferences, and rising competition from emerging markets have left even storied brands scrambling to retain relevance. Now, Kering—owner of Gucci, Bottega Veneta, and Yves Saint Laurent—has turned to an unlikely savior: Luca de Meo, the automotive executive who masterminded Renault's post-Ghosn turnaround. His appointment as CEO, effective July 2025, signals a bold bet that the strategies that revived Renault's flagging fortunes can also combat Kering's struggles in a sector increasingly dominated by Chinese rivals and tech-driven innovation.

But will de Meo's automotive playbook translate to the luxury market? The answer hinges on his ability to replicate his past successes while learning from his failures—including a high-profile collapse of a joint venture with Volkswagen—and apply them to Kering's urgent need for renewal.

De Meo's Automotive Legacy: Triumphs and Lessons

De Meo's tenure at Renault, following the fallout of Carlos Ghosn's embezzlement scandal, was marked by a ruthless focus on profitability and innovation. He slashed costs, shuttered underperforming models, and launched the “Renaulution” strategy, which aimed to modernize Renault's offerings and position it as a leader in affordable electric vehicles (EVs). Under his leadership, Renault's profit margin expanded to 8.1%, and its free cash flow hit €1.3 billion in 2024—a stark contrast to its near-bankruptcy in 2020.

Yet de Meo's collaboration with Volkswagen to co-develop an EV platform ended in acrimony, underscoring a critical flaw in his approach: an overreliance on rigid control. The project collapsed when Volkswagen refused to adopt Renault's production infrastructure, prioritizing its own systems instead. The failure highlighted the dangers of inflexibility in cross-industry partnerships—a lesson that could prove pivotal at Kering, where brand synergy and adaptability are critical.

Kering's Crisis: A Luxury Giant in Decline

Kering's troubles are deeply rooted. Its Q1 2025 revenue plunged 14% to €3.9 billion, with Gucci—its cash cow—suffering a 25% sales drop amid declining brand desirability and weak foot traffic. While Bottega Veneta's 4% growth provided a glimmer of hope, the broader picture is bleak. Asia-Pacific sales, once a growth engine, cratered 25% as Chinese tourists stayed home and inflation dampened spending. Competitors like LVMH (whose Louis Vuitton division thrives) and Prada have seized market share, leaving Kering's stock down 22% year-to-date.

The problem isn't just Gucci's slump. Kering's reliance on legacy brands in a sector increasingly dominated by tech-savvy, sustainable challengers has exposed its vulnerability. Chinese firms like LVMH's rival, Alibaba-backed brands, and emerging luxury players in beauty and wearables threaten to eclipse traditional European houses. To survive, Kering needs a leader who can blend operational rigor with visionary creativity—a profile de Meo claims to embody.

Can Automotive Tactics Work in Luxury?

De Meo's strengths align with Kering's needs in three critical areas:

1. Cost Discipline: At Renault, he slashed costs by 15% through supply chain overhauls and plant closures. Kering's weak margins (now below peers') demand similar austerity. The company has already closed 25 stores this year, but deeper cuts—particularly in underperforming markets and brands—are likely.

2. Innovation at Scale: De Meo's EV push at Renault harnessed tech to redefine affordability. For Kering, this could mean leveraging AI for personalized customer experiences or sustainable materials (e.g., recycled fabrics) to appeal to eco-conscious buyers—a move already championed by Gucci's “Off the Grid” line.

3. Strategic Partnerships: While his failed VW deal was a misstep, de Meo's success in forging alliances (e.g., Renault's tie-up with Google for in-car tech) shows he can navigate cross-sector collaborations. This could help Kering counter Chinese rivals by partnering with tech firms or sustainability innovators.

Risks and Uncertainties

De Meo's transition is not without red flags. His rigid approach to the Volkswagen deal could backfire in a sector where brand heritage and creative freedom are paramount. Gucci's new creative director, Demna Gvasalia, has already sparked investor skepticism—will de Meo's operational pragmatism clash with the need for artistic risk-taking?

Moreover, Kering's reliance on Asia poses geopolitical risks. China's crackdown on luxury spending and ongoing trade tensions could limit recovery prospects.

Investment Implications

For investors, de Meo's appointment is a double-edged sword. His track record offers hope of margin expansion and brand revitalization, but execution risks are high. Kering's stock, now trading at €360 (down from €380 in 2024), may rebound if Gucci's sales stabilize by year-end—a target de Meo will need to hit to retain credibility.

However, the broader luxury sector's shift toward tech-driven sustainability and digital engagement demands more than operational tweaks. Investors should monitor Kering's moves in e-commerce (e.g., AI-driven personalization) and material innovation, as well as its ability to retain creative talent without stifling independence.

Conclusion: A High-Stakes Gamble

De Meo's arrival at Kering is a gamble with existential stakes. His automotive experience offers a blueprint for cost discipline and innovation but may lack the nuance required to revive a brand like Gucci. Success hinges on balancing his “Renaulution” ethos with the intangible magic that defines luxury—a sector where algorithms and spreadsheets alone cannot compete with desire.

For now, investors should proceed with caution. While de Meo's leadership could stabilize Kering's stock, the road to recovery will be bumpy. Monitor closely: a Gucci sales rebound in Q4 2025 or a breakthrough in sustainable tech partnerships could tip the scales. Until then, Kering remains a high-risk play on a leader's ability to redefine luxury in a rapidly changing world.