Kering’s New CEO Faces Challenges and Opportunities in Reviving Gucci

By Bloomberg
Published: October 2, 2025

In a significant shift for Kering SA, Luca De Meo has taken the helm as CEO, stepping into a role that many believe could be pivotal for the future of the iconic fashion label, Gucci. Even before De Meo could implement his strategies, investors responded positively, driving Kering’s stock price up significantly. Analysts suggest that if De Meo successfully revitalizes Gucci, the potential for further stock growth is substantial.

A Promising Start for De Meo

Analysts like John San Marco from Neuberger Berman have noted that De Meo has already begun laying the groundwork for a turnaround. His initial moves include appointing a new leadership team at Gucci and committing to cost-cutting measures. Since the announcement of his appointment in June, Kering’s shares have surged by 64%, marking a remarkable 53% increase in the third quarter-the largest quarterly gain in the company’s history.

“There’s a very high ceiling if they start to get the creative and product right,” San Marco stated in an interview. He emphasized the importance of the recent leadership changes, which aim to clarify accountability and responsibility within the organization.

Historical Context: Kering’s Struggles

Kering, founded by billionaire François Pinault, has faced a challenging decade. Before De Meo’s arrival, the company’s shares had only returned an average of 3.8% annually. In contrast, French competitors like LVMH Moët Hennessy Louis Vuitton SE and Hermès International SCA enjoyed returns of 13% and 21%, respectively. This stark difference highlights the urgency for Kering to regain its competitive edge in the luxury market.

Gucci, Kering’s flagship brand, has been particularly affected by management instability and design challenges. The brand has cycled through four CEOs and three designers since Alessandro Michele’s departure in November 2022, a period that saw a decline in revenue for eight consecutive quarters. Analysts expect this trend to continue when Kering reports its third-quarter sales on October 22.

Market Sentiment and Future Projections

HSBC analysts, including Anne-Laure Bismuth, recently upgraded Kering’s stock from “hold” to “buy,” although they caution that Gucci may not see sales growth until the second quarter of next year. Both optimistic and skeptical investors agree that it is premature to assess the impact of De Meo’s changes. Analysts believe that the upcoming quarterly performance will largely reflect the legacy of previous management.

“The new management gets a pass as the next few quarters will be deemed to be the legacy of the previous management,” Bismuth and her team noted in a recent report. They suggest that this period will provide an opportunity for the market to recognize the significant changes already underway.

However, some skeptics argue that the market may have already priced in a potential turnaround. Since July, Kering’s shares have traded at a higher valuation relative to earnings compared to an industry benchmark compiled by Goldman Sachs, a notable shift after years of being undervalued.

Flavio Cereda, an investment director at GAM UK Ltd., expressed caution, stating, “You need a genuine reversal of trend for long-only funds to become interested again, and there’s no reason for that to happen yet.” He believes that the real impact of De Meo’s strategies will become evident in the spring of next year.

The Role of Demna Gvasalia

A key figure in Gucci’s future is Demna Gvasalia, the newly appointed artistic director, who is set to unveil his first collection in Milan in February. His creative vision will be crucial in determining whether Gucci can reclaim its status as a leading luxury brand. Analysts are cautiously optimistic, noting that while a turnaround is possible, it will not happen overnight.

Despite the challenges, there is a growing sense of optimism among analysts. The consensus recommendation for Kering’s stock has improved since De Meo’s appointment, indicating a slight shift in market sentiment. RBC analyst Piral Dadhania, who maintains a neutral rating on the stock, acknowledged the potential for positive change but emphasized that immediate results should not be expected.

Valuation and Investor Sentiment

Kering’s current high price-earnings ratio does not necessarily hinder future gains. The elevated valuation reflects a significant decline in earnings estimates over the past year. Any upward revisions to these estimates could quickly normalize the P/E ratio, making the stock more attractive to investors.

Recent data from S&P Global Market Intelligence indicates that bearish bets on Kering’s stock have decreased. The percentage of shares out on loan, a common measure of short interest, has dropped from 21% in May to about 7% as of Monday. This decline suggests that some investors are beginning to regain confidence in Kering’s prospects.

Conclusion: A Long Road Ahead

As Kering embarks on this new chapter under Luca De Meo, the path to revitalizing Gucci will require patience and strategic execution. Analysts like Morningstar’s Jelena Sokolova believe that Gucci has the potential to regain its pricing power and desirability in the long run. While the catalysts for this revival remain uncertain, the brand’s global recognition and scale suggest that it is unlikely to fall permanently out of fashion.

In summary, Kering’s future hinges on De Meo’s ability to navigate the complexities of the luxury market and restore Gucci to its former glory. As the luxury sector continues to evolve, the coming months will be critical in determining whether Kering can reclaim its position among the industry’s elite.