Struggling Gucci owner names new CEO
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 over the reins on 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 and 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 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.
- 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.
- '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 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 shake up the 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 sceptical.
"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.
M.Chandra--MT
