Kering announced a comprehensive turnaround strategy, named 'ReconKering,' aimed at doubling its profitability and revitalizing its flagship brand Gucci after experiencing a year-long slump that impacted the company more severely than its competitors [1]. CEO Luca de Meo, who took over seven months ago, revealed the plan during the company's Capital Markets Day in Florence, stating, 'a model that worked for a decade, is no longer effective for us' [1].
The company is targeting more than double its 2025 recurring operating margin of 11.1% and aims to boost its return on capital employed to over 20% in the midterm [1]. Key elements of the strategy include refurbishing or relocating two-thirds of Gucci's store network, reducing selling space by 20%, cutting outlets by a third, and reducing inventory by 1 billion euros ($1.18 billion) over the next 12 months [1].
CEO de Meo emphasized that growth will be driven by gaining market share, restoring pricing power, and executing better than peers [1]. Despite the ambitious plan, Kering's shares fell 2% early Thursday, indicating a cautious market reaction to the announcement [1].
The strategy comes amid growing investor optimism that de Meo can turn the legacy conglomerate around, but the immediate market response suggests some skepticism remains regarding the execution and timing of the turnaround [1].
CONCLUSION
Kering has launched an ambitious turnaround plan focused on doubling profitability and reviving Gucci, with significant operational changes and financial targets. While investors are optimistic about CEO Luca de Meo's leadership, the initial 2% share price drop reflects market caution about the plan's execution. The company's success will depend on its ability to deliver on these bold objectives in a challenging luxury market environment.