Kering Aims to Double Profits with New Plan to Revive Gucci

• Kering aims to more than double its 2025 recurring operating margin of 11.1% and boost return on capital employed to over 20% in the midterm
• The company plans to refurbish or relocate two-thirds of Gucci stores, reduce selling space by 20%, cut outlets by one-third, and reduce inventory by 1 billion euros ($1.18 billion) over the next 12 months
• The strategy comes after Kering was hit harder by the luxury slump than competitors, prompting investor optimism for a turnaround under new leadership

Kering Unveils Ambitious Turnaround Strategy to Revive Gucci

French luxury conglomerate Kering announced a comprehensive turnaround plan aimed at doubling profitability and revitalizing its struggling flagship brand Gucci. CEO Luca de Meo, seven months into his tenure, unveiled the "ReconKering" strategy during the company's Capital Markets Day in Florence on Thursday.

Key Financial Targets:

• More than double the 2025 recurring operating margin from 11.1% in the midterm
• Boost return on capital employed to over 20%
• Reduce inventory by €1 billion ($1.18 billion) over the next 12 months

Operational Changes:

• Refurbish or relocate two-thirds of Gucci's store network
• Reduce selling space by 20%
• Cut outlet locations by one-third

Market Context:

De Meo acknowledged that Kering's previous business model, effective for a decade, is no longer working. The company has been hit harder than competitors during a year-long luxury sector slump, prompting investor concerns about its performance.

The CEO emphasized that growth will come first from regaining market share, signaling a strategic shift in the company's approach to its luxury portfolio.

Investment Implications:

The announcement comes amid mounting investor optimism about de Meo's ability to turn around the legacy conglomerate. The aggressive restructuring plan targets both profitability and operational efficiency, with significant store network optimization and inventory reduction at its core.

The strategy represents a major pivot for Kering as it seeks to regain competitiveness in the challenging luxury market environment and restore Gucci's brand strength.