From cars to handbags: can Renault’s Luca de Meo revive Gucci owner Kering?
Italian transformed motor group but views are split on whether his methods will work in luxury sector
Luca de Meo was among the French business elite celebrating the opening of the 2024 Olympic Games at a party hosted by luxury group LVMH at its five-star Cheval Blanc hotel in Paris last July.
The Renault chief executive joined LVMH patriarch Bernard Arnault and top executives such as Louis Vuitton chief Pietro Beccari. But few expected that within a year the motor industry veteran would end up with the top job at LVMH’s longtime rival: Kering.
The Italian is set to leave Renault next month to become boss of Kering, the struggling owner of Gucci and Saint Laurent, from mid-September.
While de Meo has spent his entire career in the car industry, he has been making discreet overtures to the luxury industry for some time, according to two people with knowledge of the situation.
He cemented his reputation by leading a turnaround of Renault, which he took over in 2020 when it was still reeling from the departure of Carlos Ghosn the previous year. Ghosn had been ousted following his arrest in Japan on charges he denies, later making a daredevil escape to Lebanon in a musical instrument box.
Since de Meo took over in July 2020 Renault’s share price has almost doubled, while Volkswagen’s has fallen by a third and Stellantis’s has been almost flat. Renault’s operating profit margin improved from a loss in 2020 to a record 7.6 per cent last year.
As he moves from one top French company to another and prepares to steer another corporate turnaround, the question is whether de Meo’s lack of experience selling handbags and high heels will help or hinder his attempt to revive Kering.
“Luxury is a bit different from carmakers” said one luxury executive, who said de Meo was “a big captain of industry and a real star” who could still succeed in his new role.
“Kering isn’t lacking in creativity, but in structure and discipline,” the person said.
A combination of strategic mis-steps and a global slowdown in demand for high-end handbags and watches has left Kering in a difficult position. Flavio Cereda, fund manager and luxury specialist at GAM, said Kering had to “do something big” to address the situation.
Kering’s slowdown follows several years of strong growth. Revenues increased by a third to a peak of €20.4bn between 2018 and 2022, driven by the boom in luxury demand in China and the success of Gucci.
But Gucci, which accounts for about half of group revenues and two-thirds of operating income, has since fallen out of favour with few timeless products to offset industry downturns or changes in fashion trends.
Kering’s second-biggest brand, Saint Laurent, has also been struggling. A €3.5bn deal for niche perfumer Creed is among the acquisitions that have raised questions about Kering’s dealmaking, along with a series of expensive real estate purchases. It is now selling stakes in some of the buildings as it seeks to reduce debts.
In March, shares dropped 12 per cent in a day as Kering appointed designer Demna Gvasalia as Gucci’s creative head after his predecessor lasted just two years in the role.
While the shares rose 11.8 per cent on Monday after news of de Meo’s appointment, they are still down by more than 60 per cent in the past three years, reducing the Paris-listed group’s market value to €24.1bn.
Bernstein analyst Luca Solca said de Meo’s top priorities should be reviewing the team and strategy at Gucci, the group’s biggest brand, as well as cutting debt and refocusing investments.
At Renault, de Meo cut costs and improved the product range, including the release of the popular Renault 5, one of its most affordable electric vehicles.
Some question whether his experience with cost-cutting and product engineering will yield the same results in the luxury industry, where sales are often driven by emotion and aspiration as much as quality.
But others point out that a number of top managers have come from outside the sector: Antonio Belloni, former group managing director of LVMH, came from diaper and detergent maker Procter & Gamble, and Louis Vuitton’s Beccari from industrial and consumer products group Henkel.
People close to Kering say François-Henri Pinault, the scion of Kering’s controlling family who de Meo will replace as chief executive, wants the new hire to deploy his business development and marketing acumen to revive the group’s fortunes. Operating income fell by almost half in 2024.
Pinault, who will remain as chair, a role he previously held alongside his duties as chief executive, said on Monday that de Meo was “not only a great developer . . . but also very operational with a deep understanding of the value chain [in his industry]”.
“He will do that here . . . while bringing his new way of looking at things, which will be very precious,” he added.
People who have worked with de Meo describe him as a street smart, ambitious leader who turned Renault’s relative lack of clout into an asset.
The group’s European focus has left it less exposed to the US tariffs and market share loss in China, while he used partnerships with other providers such as a combustion engine tie-up with Geely to get around Renault’s lack of scale.
For Kering, De Meo was “hardly a ‘plug and play’ appointment but it’s a start, finally”, said GAM’s Cereda. “In the end, it’s still about a product offering that is just not working at this time.”
Known to have a taste for sharp suits and Swiss watches, de Meo’s management style has not always sat well with colleagues, with his ego said to have caused friction at times. “De Meo’s problem is de Meo,” said an executive in the auto industry.
But one person who has advised de Meo said he was good at spotting his weaknesses and hiring people to either compensate for expertise he lacks, or to “keep him in check”.
People close to the group hope the Milan-born de Meo’s French and Italian cultural ties will help him cultivate rapport between Kering’s French head office and its operations in Italy, where there have been tensions over the direction of the company, according to several people with knowledge of the situation.
However, he has a long road ahead. “It’s very difficult to turn around a brand like Gucci once you’ve destroyed its image . . . When you lose the consumer like that it takes time to regain them,” said one French banker.
Another challenge will be to build a strong relationship with Pinault, who has over two decades transformed Kering from a retail and fashion conglomerate into a leading pure luxury player.
Pinault had been thinking about changes to Kering’s governance, including splitting the chair and CEO roles since 2023, quietly sounding out candidates for chief executive. But it was not until he met with de Meo through recruitment firm Jouve in recent months that he felt he had identified the right person.
Pinault insisted on Monday that de Meo would be “a full CEO, with all the empowerments I had”.
“I will be fully involved in strategic orientation as chair of the board . . . but I won’t step in and short-circuit the new CEO,” he said, before adding: “I don’t expect a revolution.”
