Kering Unveils 'ReconKering' Strategy to Revitalize Gucci and Double Profits

Kering has introduced a comprehensive strategic overhaul titled 'ReconKering,' designed to reverse a prolonged slump in the luxury market and revitalize its primary profit driver, Gucci. CEO Luca de Meo, who took the helm seven months ago, stated that the previous decade's growth model is no longer effective, necessitating a shift toward gaining market share and restoring pricing power. The plan comes as the group faces significant structural headwinds, including waning demand in China and geopolitical instability in the Middle East. Gucci has suffered 11 consecutive quarters of organic sales declines, prompting a pivot toward a more refined, 'unmistakable' brand identity that emphasizes craftsmanship over loud logos. Financial targets are aggressive, with the group aiming to more than double its 2025 recurring operating margin of 11.1% and push return on capital employed above 20% in the medium term. Operationally, Kering will slash inventory by 1 billion euros ($1.18 billion) over the next year and refurbish or relocate two-thirds of the Gucci store network to increase sales density by 2030. A key pillar of the recovery is a product shift, with the company intending to double the contribution of leather goods and handbags from 10% to 20% by 2030. Additionally, Kering is seeking to mitigate brand concentration risk by elevating Yves Saint Laurent, Bottega Veneta, and Balenciaga. To support these initiatives and reduce corporate debt, Kering recently completed the sale of its beauty division to L'Oreal for 4 billion euros in cash. Despite the detailed roadmap, investors reacted cautiously to the news, with shares declining 2.5% following the announcement.