Kering looks to double profits with turnaround plan to revive Gucci
A woman is seen wearing a Gucci belt and bag at Paris Fashion Week in September 2018
Christian Vierig | Getty Images
Kering It aims to double its profitability and revitalize its flagship brand Gucci, it said on Thursday, unveiling a much-anticipated strategy to get the company back on track after a year-long luxury slump that has hit it harder than its rivals.
CEO Luca de Meo unveiled the strategy seven months after taking over the reins, as investor optimism grew that he could turn the former conglomerate around.
“In summary, a model that has worked for a decade is no longer effective for us,” he said at the company’s Capital Markets Day in Florence on Thursday. “Growth will come primarily from gaining share, restoring pricing power and outperforming our peers.”
Shares fell 2.5% on Thursday.
The strategy, called “ReconKering,” involves more than doubling the company’s recurring operating margin from 11.1% in 2025 and increasing its return on capital employed to more than 20% in the medium term.
Kering also aims to renovate or relocate two-thirds of the Gucci store network, doubling sales density by 2030 by reducing sales space by 20% and outlets by a third. It also aims to reduce total inventory by 1 billion euros ($1.18 billion) over the next 12 months.
De Meo has already taken steps to reduce debt at the company; completion sales of beauty department L’Oréal In March, in exchange for 4 billion euros in cash.
The important task of turning around money-making Gucci remains an important issue.
“As the luxury sector continues to face structural and cyclical headwinds, an important question is how quickly Gucci can regain center stage and return to healthy growth,” Citi analysts said Thursday morning.
Gucci problem
Gucci, which accounts for the bulk of Kering’s profits, is a major concern for shareholders.
Kering on Tuesday reported its 11th consecutive quarter. Organic sales at Gucci fell and it was stated that sales were affected by the conflicts in the Middle East.
Like many of its luxury peers, Kering has experienced years of contraction after its boom ends in 2022. Demand rose sharply during the Covid-19 pandemic, leading to price increases that eventually alienated customers. Combined with weak demand in China, which used to be one of the industry’s main growth drivers, businesses have suffered.
De Meo acknowledged Thursday that Gucci had “lost some of its luster.”
“Our priority is to make Gucci perfect,” he said. “It’s not louder, it’s not more complex, it’s just unmistakable.”
“This work has already begun. We are refocusing brands on fewer narratives, but sharper, stronger and more consistent narratives,” he added.
He said Gucci’s recognizability is one of its greatest assets, but that doesn’t mean “covering the world in GG.” He said that being “open” can also be quiet, discreet and elegant, expressed through codes of craftsmanship and identity that are “immediately Gucci.”
The luxury giant aims to double the contribution of leather goods and bags to 20% by 2030, from 10% today. “We will do this without losing our fashion authority, because Gucci heritage and fashion must coexist,” De Meo said. “Restoring desirability also requires restoring the strength of our product offering.”
Kering said it needed to not only improve Gucci’s performance, but also reduce the group’s dependence on the brand by strengthening other brands such as Yves Saint Laurent, Bottega Veneta and Balenciaga.
The company wants to leverage the distinct identities of its more than 10 different brands while also increasing synergies across the group.
For Saint Laurent, this entails doubling down on its “fashion authority” and “desirable silhouette”, while also strengthening its men’s offering and focusing on Asia.
Meanwhile, Bottega Veneta should be the group’s “symbol of profound luxury” and Balenciaga should appeal to the younger generation.
