Paris (AFP) – French luxury group Kering announced Monday that it had appointed Luca de Meo, who helped drive automaker Renault out of crisis, its new chief executive as it tries to turn around the fortunes at its struggling flagship brand Gucci.
De Meo’s appointment “marks a decisive step in the evolution of Kering’s governance and strengthens the Group’s leadership as it enters a new phase of its development,” the company said in a statement. It said de Meo would take the reins in September after shareholders approve the change in the governing structure that will see the chief executive and board chairman roles split at the group that owns Gucci, Yves Saint Laurent, Balenciaga, and other premium brands. Francois-Henri Pinault, whose family controls the holding that is the largest shareholder in Kering, will remain board chairman.
Kering has struggled to turn things around at Gucci, the Italian fashion house famous for its handbags which accounts for half of the group’s overall sales. Shares in Kering shot nearly 12 percent higher on reports of de Meo’s imminent appointment, which was only confirmed by the company after the closing of the Paris stock exchange. Renault shares, however, fell 8.7 percent following its announcement Sunday that de Meo, 58, would step down on July 15 “to take on new challenges outside the automobile sector” after five years at the helm of the company.
– **Turnaround Engineer** – Known as a skilled communicator and marketing expert, de Meo is credited with bringing stability to a company that was in turmoil when he took over in 2020. The automaker was reeling from more than a year of crisis in the wake of the scandal involving Carlos Ghosn, the former head of the Nissan-Renault alliance who fled Japan to avoid trial. De Meo accelerated the group’s shift to electric vehicles and pushed for an upmarket move in an effort to steer the company out of trouble. Renault also owns the Dacia and Alpine brands.
In a conference call following the announcement, Pinault praised de Meo’s “passion for managing and revitalizing brands” and said he had “proven his skills at leading major transformation” at Renault.
– **’Kering Needs to Change’** – Monday’s jump in Kering’s share price still leaves long-term investors deep in the hole. “Kering shares have lost 28 percent since the beginning of the year and 78 percent since its peak in mid-2021, a drop largely due to the drop in its leading brand Gucci,” said analysts at Bernstein bank in a note. “Kering needs to change as the group’s performance continues to deteriorate,” they added.
The company’s sales slid 12 percent last year to 17.2 billion euros ($20 billion) and net profit tumbled by 64 percent to 1.1 billion euros. Shares in Gucci fell by 23 percent in 2024, and in February it parted ways with its creative director, Italian designer Sabato De Sarno, after a collaboration that lasted two years and failed to turn things around at the fashion label known for its handbags with the double G logo. In March, it appointed Demna Gvasalia from its Balenciaga brand as chief designer, and it has also appointed new designers at Balenciaga, Yves Saint Laurent, and Bottega Veneta.
– **’Outsider’** – Analysts at RBC Capital Markets said that de Meo may be able to shake up Kering’s senior management, which consists mostly of insiders. “We assume Mr. de Meo will act as a spearhead for the business, and as an outsider, be more willing to make tougher decisions and to add depth to the leadership team,” they said.
But they questioned “whether he has the relevant luxury sector experience despite his strong resume in terms of strategic viewpoint and turnaround credentials.” Meanwhile, analysts at bank Citi noted that “execution of luxury brand turnarounds has become more complex, lengthy, costly, and far less public-market-friendly in the past few years.” Pinault acknowledged de Meo’s lack of background in the luxury industry but said: “He will be working with many of the best experts in luxury present at all levels of our group and our houses.”
© 2024 AFP
