Gucci Owner Kering Banks on De Meo's Record for a Turnaround

(Bloomberg) -- While fixing French carmaker Renault SA, Chief Executive Officer Luca de Meo pursued a hobby that would feed into his next job as CEO of Kering SA: A taste for the finer things in life, particularly Swiss watches.
'Brand management and marketing are his forte, which dovetails with what the luxury industry does — for which he seems passionate,' Luca Solca, an analyst at Bernstein wrote in a note, recalling a conversation about fine timepieces with De Meo at a Renault event three years ago. Now that De Meo has been named as CEO of the French owner of Gucci and other luxury brands, 'it is not hard to imagine how intriguing he found the Kering opportunity,' Solca said.
Although De Meo has no direct fashion or consumer-goods sector experience — having spent his entire career in the auto business — luxury industry observers are betting his keen sense for what clients want and the attention to detail he displayed at Renault may be just what Kering needs.
De Meo led the turnaround of Renault after taking charge of the French carmaker about five years ago, returning it to profit and growth despite substantial challenges facing the global auto industry, including an uncertain transition to electric vehicles, escalating trade tensions and the rise of highly competitive Chinese rivals.
Kering shares, which on Monday recorded the biggest one-day jump since December 2008, slid as much as 2.3% in early trading in Paris. Renault, which tumbled 8.7% on Monday, was little changed.
Kering, led by Francois-Henri Pinault for more than two decades, can use the help as the luxury industry weathers a slump in Chinese demand and the threat of higher US tariffs. Before the jump on Monday, Kering's stock had lost almost 80% of its value since reaching a record in August 2021 as it fell further behind rivals such as LVMH and Hermes International. The group has tried to turn around its main brand Gucci by naming new designers but the efforts have failed. Kering has also appointed new CEOs for labels including Gucci and Yves Saint Laurent in the past year.
'De Meo has a titanic challenge ahead of him' said Solca. 'Critically, investors will need to hear what it is that De Meo plans to do and digest how soon his plans can be realized. If he says 'more of the same,' then investors would (quickly) go back to where we are now. If he comes in with a vision, then it could be something else.'
In addition to finding growth again at Gucci, De Meo will need to win the trust of all the teams after sweeping changes of top managers in recent years, said Ariane Hayate, a fund manager at Edmond de Rothschild Asset Management. He'll also need to tackle the group's elevated debt, which has soared over the past three years, she said.
Some investors are worried that De Meo's lack of experience in the luxury industry will mean a failure to address the absence of revenue growth in a difficult industry context, according to Zuzanna Pusz, a UBS analyst.
'The concern is that the focus could potentially be on cost cutting,' she said.
What the executive has going for him is the fact that he's an Italian who has worked for many years at French groups, noted Morgan Stanley analysts including Edouard Aubin and Grace Smalley. Kering's Italian Gucci brand accounts for almost two-thirds of its profit. Also, De Meo 'has a strong track record as a turnaround executive and is very well regarded within the automotive industry,' the analysts said.
Renault was in crisis when De Meo — who had previously worked at Fiat and Volkswagen AG — took charge in mid-2020. The French company was coming off a record first-half loss and had announced plans to slash almost 15,000 jobs. Then, even after Russia's invasion of Ukraine prompted the manufacturer to pull out of what had been its second-biggest market, Renault vastly outperformed its European rivals and its longtime Japanese alliance partner Nissan Motor Co.
'We credit him for bringing back 'color,' energy and peak results to Renault after years of sub-par product and financials,' Jefferies analyst Philippe Houchois wrote in a note.
During his tenure, De Meo inked partnerships for Renault with fashion brands such as Agnès B. His affinity for style has also been evident in his custom-made suits and his pocket squares — always impeccably folded with three or four points. A polyglot — he's fluent in Italian, French, Spanish, English and German — De Meo has authored a book entitled 'A Dictionary for Car Lovers,' showing a commitment to the emotional appeal of brands.
For instance, one of the first big moves he made after taking over as CEO was to re-brand Renault's Formula 1 team as Alpine, starting with the 2021 season. Alpine, a more than half-century old French marque that Renault had revived only a few years earlier after two decades of dormancy, could become 'a mini Ferrari,' the executive boasted in October 2020. He then set out to build up the brand's scale and status.
While the Alpine efforts have yet to show success in Formula 1, De Meo impressed investors by the pace of the company's new model launches. Last year, Renault introduced 10 new car models, including the Renault 5 — with accessories, including a wicker basket as baguette holder. This year, it is launching seven, including the electric Renault 4 and Alpine A390. De Meo's approach became a case study for Harvard Business School.
Just how critical he considers brand building was evident at the Geneva car show last year. Even as almost all of the world's carmakers stayed away, calling car shows a thing of the past, De Meo and Renault turned up, winning a lot of attention they may not have gotten for the launch of the new Renault 5 — a car of the past that Renault modernized and launched as electric for the future.
It was vintage De Meo — and helped make R5 one of the company's most high-profile new launches in recent times.
De Meo is someone who has 'great brand insight but who's also able to re-energize the teams he works with and has the courage to try new things,' said Fabrizio Ferraro, professor of strategic management at IESE business school. That's crucial for Kering since 'the usual playbook of the luxury industry seems to have run out of steam,' he said.
(Updates with shares in fifth paragraph.)
More stories like this are available on bloomberg.com

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

India Today

34 minutes ago

• India Today

China holds first trilateral meeting with Pakistan and Bangladesh

China, Bangladesh and Pakistan held their first trilateral meeting at the official level in China's Kunming. The meeting took place on Thursday and was attended by key representatives from all three Vice Foreign Minister Sun Weidong, Bangladeshi Acting Foreign Secretary Ruhul Alam Siddique and Additional Foreign Secretary of Pakistan Imran Ahmed Siddiqui participated in the meeting in person. Pakistani Foreign Secretary Amna Baloch joined the first phase of the discussions via video her remarks, Foreign Secretary Amna Baloch appreciated China for organising the inaugural meeting of the trilateral mechanism. She said, 'The Chinese side has done well in convening the inaugural meeting of the trilateral mechanism.' Noting the shared goals of the three nations, she said, 'There are common aspirations of the three sides for people-centric development.' She added that Pakistan seeks 'deeper engagement between China and South Asian countries'.Baloch also noted the positive momentum in Pakistan-China bilateral relations and said Islamabad was ready to boost cooperation with Islamabad and Dhaka in multiple further said Pakistan was ready to work with China and Bangladesh to enhance ties in trade and investment, agriculture and digital Watch IN THIS STORY#Pakistan#Bangladesh

Business Standard

41 minutes ago

• Business Standard

China, Pakistan, Bangladesh hold inaugural trilateral ministerial meet

China, Pakistan, Bangladesh have held the inaugural session of their trilateral meeting of foreign ministry officials, Beijing's new strategic initiative to promote closer ties between two estranged South Asian countries in India's immediate neighbourhood. It is the second such trilateral that China has established in India's neighbourhood after its foreign ministers' mechanism with Pakistan and Afghanistan last month. On Thursday, Chinese Vice Foreign Minister Sun Weidong, Bangladeshi Acting Foreign Secretary Ruhul Alam Siddique and Additional Foreign Secretary of Pakistan Imran Ahmed Siddiqui attended the meeting held at the Chinese city of Kunming, capital of Southern Yunnan province. Pakistani Foreign Secretary Amna Baloch participated in the first phase of the meeting via video link, a Chinese Foreign Ministry press release said here on Friday. In his address, Sun Weidong said Bangladesh and Pakistan are both good neighbours, good friends, and good partners of China, and important partners in high quality Belt and Road cooperation, the Foreign Ministry's press release said. Cooperation among China, Pakistan and Bangladesh aligns with the common interests of the three peoples, and can contribute to regional peace, stability, development and prosperity, Sun who was a former Ambassador to Pakistan and India, said. The three sides exchanged views extensively on China-Pakistan-Bangladesh trilateral cooperation and agreed to establish a working group to follow up and implement the understandings reached during the meeting, the press release said. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Mint

an hour ago

• Mint

Swiss Seek European Arms Procurement Ties to Bolster Defense

(Bloomberg) -- The Swiss government is seeking closer collaboration with other European nations in defense procurement, following warnings by senior officials over the country's struggling arms industry. As part of a new defense strategy announced on Friday, Switzerland aims to buy at least 30% of its arms from Europe. Swiss forces should also use the same weapon systems as their neighbors, or at least compatible ones, the government said in a statement. 'It's a give and take,' the government said. 'Swiss companies need to gain access to international cooperation and the supply chains of foreign system suppliers.' Russia's full-scale invasion of Ukraine and concern over US President Donald Trump's commitment to NATO's mutual defense clause is forcing Europe to rearm, making it more challenging for small countries like Switzerland to place orders. At the same time, the Swiss defense industry has been frozen out of procurement efforts as the country's rules — rooted in its neutrality stance — mean it has blocked requests to send arms and ammunition to Ukraine. As neither a member of NATO nor the European Union, the Federal Council reiterated that neutral Switzerland is finding it difficult to order arms, as suppliers ship to bigger countries first. The strategy update will likely put further pressure on parliament to ease stringent rules, which forbid the re-export of war material with more than 50% of domestically produced components. Swiss defense exports have slumped by 30% from a record in 2022, as arms producers have started to shift production abroad to circumvent the restrictions. 'Because it refuses to re-export Swiss war material to Ukraine, it is no longer regarded as a reliable partner by European countries,' the government said. 'An increasing number of countries are therefore excluding Switzerland from procurement projects and supply chains.' Earlier this month, NATO member states adopted the alliance's most ambitious military ramp-up since the Cold War. Last week, the Swiss Upper House approved proposals that would reinstate the government's power to permit passing on such arms to conflict zones. The bill still needs approval in parliament's Lower House. Though small in its contribution to economic output, the Swiss policy of ''armed neutrality' has magnified importance of the country's defense sector: Swiss law enshrines the need to maintain an industrial capacity 'adapted to the requirements of its national defense.' Senior officials have expressed fears that a dwindling domestic defense industry lowers Switzerland's negotiating heft with foreign suppliers. More stories like this are available on