Kering’s fragile rebound tests Luca de Meo’s turnaround playbook

Is the luxury downturn finally easing? Investors appear to be cautiously optimistic after shares in Kering surged 14 per cent following the publication of its full-year results. The rise marked the largest one-day jump for the luxury group in nearly two decades, and the optimism led to similar gains among its peers at Burberry, Richemont and Brunello Cucinelli in Italy. 

The rally also suggests investors are eager for evidence of a cyclical bottom in luxury, even if confirmation remains tentative and uneven across brands. Luca de Meo, the former Renault executive parachuted in as chief executive last September, struck a note of cautious optimism on the earnings call, telling analysts that the recovery remains “early, fragile, but real.”

A slowdown, but less severe than feared

Kering’s fourth-quarter revenue fell 3 per cent on a comparable basis to €3.9 billion, a modest beat versus market expectations. For the full year, revenue declined 10 per cent to €14.7 billion, while recurring operating income dropped 33 per cent to €1.63 billion, dragging operating margins down to 11.1 per cent from 14.5 per cent a year earlier. 

The group also reported a net loss of €29 million from continuing operations, primarily attributable to restructuring costs. However, recurring net income was €532 million, less than half the prior year’s level.

What encouraged investors was signs of sequential improvement and balance-sheet repair. Net debt fell to €8 billion by year-end, down €2.5 billion from 2024, following asset disposals and tighter capital discipline. De Meo has made deleveraging a priority as he seeks to restore financial flexibility after years of rising debt and weakening profitability left the group under intense investor scrutiny.

Gucci’s long shadow 

Gucci remains both Kering’s greatest asset and its most persistent vulnerability. Last year, the brand’s revenue fell 19 per cent on a comparable basis to €6 billion, while recurring operating income plunged 40 per cent. Fourth-quarter sales were still down 10 per cent, though management highlighted sequential improvement as new collections began to land.

Demna’s first full Gucci runway show, scheduled for later this month in Milan, has become the group’s clearest near-term catalyst. A successful debut could stabilise demand and rebuild credibility with fashion buyers. A misfire would deepen concerns that recovery will take longer and cost more than investors currently expect.

De Meo’s industrial logic meets luxury culture

De Meo is no stranger to turnarounds. At Renault, he cut costs, simplified brand architecture and restored profitability. But luxury is a different terrain, less forgiving of financial engineering, more dependent on creative intuition and long-term brand equity.

Still, his early moves suggest a deliberate attempt to impose industrial discipline on a business that had grown unwieldy. In October, Kering agreed to sell its beauty business and several fragrance licences to L’Oréal for €4 billion.

Pockets of resilience beyond Gucci

Away from Gucci, Kering’s portfolio offered some signs of stability. Bottega Veneta delivered 3 per cent comparable growth in 2025, driven by leather goods and selective distribution. Yves Saint Laurent saw sales fall 6 per cent, but posted a stable fourth-quarter performance as new product introductions gained traction in North America and Western Europe.

The group’s jewellery houses, including Boucheron, Pomellato and Qeelin, continued to expand. Kering Eyewear, meanwhile, grew 3 per cent on a comparable basis and maintained healthy margins. 

Yet these bright spots were not enough to offset ongoing restructuring losses at Balenciaga and Alexander McQueen, which dragged the “Other Houses” division deeper into the red.

Waiting for April

For now, de Meo is asking markets for patience. 

“The performance in 2025 does not reflect the group’s true potential. In the second half, we took decisive actions – strengthening the balance sheet, tightening costs, and making strategic choices that lay the foundations for our next chapter,” he said. 

Kering expects a return to growth and margin improvement in 2026, but has offered few specifics ahead of its Capital Markets Day on April 16. That event is expected to outline brand-by-brand strategies, a leaner organisational structure and clearer capital allocation priorities.

“Our objective is clear,” de Meo told analysts. “Reignite desirability and prepare the next cycle of growth, house by house, product by product, client by client.”

Further reading: Inside Kering’s billion-dollar beauty exit and Luca de Meo’s reset plan.

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