Paris (AFP) – Shares in Gucci owner Kering jumped Monday over reports that the outgoing boss of French automaker Renault would take over as chief executive of the struggling luxury group. Renault shares, however, fell following its announcement Sunday that Luca 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.
Le Figaro newspaper reported that de Meo would take over at Kering, the French luxury group that owns Gucci, Yves Saint Laurent, Balenciaga, and other premium brands. 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. Previous reports have said the group’s chief executive Francois-Henri Pinault would stay on as chairman of the group in a management shake-up. Kering shares rose more than nine percent in midday deals at the Paris stock exchange. Shares in Renault fell nearly seven percent.
– 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. The automaker managed to avoid the sales slowdown that has hit its main rivals and has maintained its guidance for a gross operating margin of more than seven percent this year. Monday’s jump in Kering’s share price still leaves long-term investors deep in the hole.
– ‘Kering needs to change’ – “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, 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 has also appointed new designers at Balenciaga, Yves Saint Laurent, and Bottega Veneta.
– ‘Outsider’ – Analysts at RBC Capital Market 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. They also said, “we question whether he has the relevant luxury sector experience despite his strong resume in terms of strategic viewpoint and turnaround credentials.” Analysts at Citi were also skeptical. “De Meo is perceived to have largely contributed to Renault’s turnaround. However, execution of luxury brand turnarounds has become more complex, lengthy, costly, and far less public-market-friendly in the past few years,” they noted.
© 2024 AFP
