Kering Unveils Ambitious ‘ReconKering’ Strategic Plan to Double Operating Margin and Reclaim Luxury Leadership by 2030
FLORENCE, Italy – Luxury conglomerate Kering, owner of iconic brands such as Gucci, Saint Laurent, and Balenciaga, announced an ambitious strategic overhaul at its Capital Markets Day in Florence, targeting a more than doubling of its 2025 recurring operating margin in the "mid-term." The comprehensive plan, dubbed "ReconKering," was detailed by Chief Executive Officer Luca de Meo, who outlined a multi-phase roadmap designed to restore profitability, rejuvenate brand desirability, and reclaim the group’s leadership position in what he termed "Next Luxury."
The announcement comes at a critical juncture for Kering, which has faced significant headwinds, particularly concerning its flagship brand, Gucci. The group posted a net loss of 29 million euros in 2025, a stark contrast to the net profit of 1.02 billion euros recorded the previous year. This dramatic shift was primarily attributed to nonrecurring items linked to extensive optimization and restructuring measures undertaken by the group. Recurring operating profit plummeted by 33 percent to 1.63 billion euros, with the recurring operating margin falling sharply from 14.5 percent to 11.1 percent in 2025. Gucci, despite its recent struggles, still accounted for a substantial 59 percent of the group’s operating profit last year, underscoring its pivotal role in Kering’s overall financial health.
The Urgency of Transformation: Kering’s Recent Performance Challenges
The need for such a radical strategic shift became acutely apparent with the group’s lackluster first-quarter results for 2026. Revenues declined by 6.4 percent in reported terms to 3.57 billion euros, sending Kering’s shares down by 9.3 percent following the announcement. This performance lagged behind some of its major competitors, with Hermès International reporting a more modest 1.4 percent decline in revenues during the same period, while LVMH Moët Hennessy Louis Vuitton’s key fashion and leather goods division saw sales fall by 9 percent.
The most significant concern for analysts and investors revolved around Gucci’s performance, which recorded a steep 14.3 percent decline in reported sales and an 8 percent drop in organic terms. This marked the eleventh consecutive quarter of negative organic growth for the star brand, prompting widespread skepticism about the pace of its turnaround. Oliver Chen, an equity analyst at TD Cowen, noted that "uplift from the new creative direction is taking longer to materialize than investors initially expected." He emphasized the need for "more consistent momentum across regions, particularly in China, alongside clearer evidence of product-led acceleration before turning more constructive."
Regionally, Gucci’s sales improved by 8 percent in North America but sank by 12 percent in Europe and 14 percent in Asia-Pacific, according to TD Cowen. This divergence highlights the complex challenges Kering faces in navigating varied global consumer landscapes and the uneven impact of its brand strategies.
"ReconKering": A Three-Phase Roadmap to Revitalization
Luca de Meo, who took the helm of the luxury group in September, has wasted no time in diagnosing the issues and charting a new course. His "ReconKering" strategy is articulated around three distinct yet interconnected phases:
- Structural Reset (by end of 2026): This initial phase focuses on completing fundamental changes within the organization, streamlining operations, and optimizing the group’s infrastructure.
- Rebuild Phase of Sustainable Growth (by end of 2028): Following the reset, Kering aims to establish a solid foundation for consistent, long-term growth across its portfolio of brands.
- Reclaiming Leadership (by end of 2030): The ultimate objective is for Kering to re-establish itself as the "reference player in Next Luxury," leading the evolution of the luxury sector.
De Meo underscored the philosophy behind the plan: "ReconKering is our way of reconnecting with what makes Kering unique, while embracing what luxury is becoming. True Luxury is our mission, and Next Luxury is our horizon. This plan brings the two together with the agility of a challenger, a renewed focus on desirability and a stronger commitment to execution." He stressed the importance of promoting clearer priorities, better accountability, and faster decision-making across the group.
Strategic Pillars and Operational Rigor
Beyond the headline margin target, Kering detailed several other ambitious financial and operational objectives. The group aims to gradually outperform its luxury sector peers in revenue terms and structurally improve its Return on Capital Employed (ROCE) to above 20 percent in the mid-term. To support these goals, Kering plans to maintain a disciplined capital expenditure envelope of between 5 percent and 6 percent of revenue and uphold a consistent dividend policy targeting a payout ratio of around 50 percent of recurring net profit. These targets signal a commitment to both growth and shareholder returns, albeit within a framework of rigorous financial management.
Profitability, according to Kering, will be supported by "a stronger mix, focused execution and operational rigor across the group." This implies a strategic emphasis on higher-margin products, efficient supply chains, and stringent cost control.
Key Initiatives and Structural Changes Underpinning the Plan
De Meo has already initiated several concrete measures since his appointment to streamline operations and reduce debt. These include the creation of two new centers of excellence: one dedicated to industry, focusing on manufacturing and supply chain efficiency, and another for client relations, aimed at enhancing customer experience and loyalty. Recognizing the accelerating pace of technological change, Kering has also appointed a chief digital, AI, and IT officer to spearhead digital transformation efforts. Furthermore, a dedicated unit for high jewelry has been established, signaling Kering’s intent to significantly grow its presence in this lucrative segment.
A major component of the restructuring involves a radical rationalization of Kering’s retail footprint. The group plans to close at least 100 more stores this year, adding to previous closures, as it continues to trim loss-making or underperforming locations. Kering ended the previous year with 1,719 stores and intends to "resize and strengthen our footprint" by renovating two-thirds of its remaining retail network by 2030. This strategic adjustment aims to optimize store performance, enhance the customer experience in key locations, and align the physical presence with the evolving luxury retail landscape.
Brand-Specific Revival Strategies: Gucci at the Forefront
While the "ReconKering" plan encompasses the entire group, a significant focus remains on the turnaround effort at Gucci. De Meo explicitly stated that Gucci’s "recovery will be real because it will be structural," indicating a deep-seated approach rather than superficial adjustments. The presentation shed light on specific ambitions for the brand, now creatively led by Demna, formerly of Balenciaga, who was among the creative directors present at the Capital Markets Day.
Gucci aims to double its sales density in boutiques and significantly boost its "icon products" business. By 2030, the brand targets adding 1 billion euros in leather goods business and 600 million euros from ready-to-wear (RTW) and shoes. Its watches and jewelry segment is projected to grow substantially from 200 million euros to 700 million euros, though specific timelines for these categories were not provided.
Beyond Gucci, other key brands within the Kering portfolio also have ambitious growth targets:
- Saint Laurent: Aims to double its menswear and Asia businesses, leveraging its strong brand identity and global appeal.
- Bottega Veneta: Focused on doubling its non-leather goods categories, diversifying beyond its traditional strength in leather.
- Balenciaga: Plans to double its leather goods, women’s RTW, and U.S. business, indicating strategic emphasis on key product categories and a crucial geographic market.
Notably, the restructuring plan aims to return all Kering brands, excluding Alexander McQueen, to growth and improved margins. This suggests a differentiated strategy where McQueen may undergo a longer-term repositioning or more focused niche development.
The Human Element: Leadership and Creative Vision
De Meo emphasized a collective approach to the transformation, stating, "The transformation we’re driving is not the project of one individual. Our collective target will be to bring that clarity and decisive action to ensure that execution, and not just vision, defines our ambition." This sentiment was reinforced by the presence of key creative directors and brand CEOs at the event, including Saint Laurent’s Anthony Vaccarello, Balenciaga’s Pierpaolo Piccioli, and Bottega Veneta’s Louise Trotter, who mingled with Kering chairman François-Henri Pinault. De Meo invited all his top managers and creatives to join him on stage, sharing his personal views on the industry.
He articulated his core philosophy: "Everyone in our industry talks about luxury. For me, beyond desirability, the word that truly matters is excellence. Luxury is a perception. Excellence is a discipline." This focus on disciplined execution and a relentless pursuit of excellence is central to his vision for Kering’s revival.
Analyst Scrutiny and Market Skepticism
Despite the detailed roadmap, equity analysts remain cautiously optimistic, highlighting the inherent difficulties of luxury brand turnarounds. The recent disappointing performance of Gucci’s new collections under Demna, including "La Famiglia," "The Lookbook Collection," and "Primavera," has been a point of contention. Analysts on Kering’s recent earnings call proved themselves extremely well-versed in these collections, pressing for delivery dates that might lift the weak numbers.
Luca Solca, an analyst at Bernstein, expressed skepticism, suggesting that "delivering top-line growth ambitions at Gucci now seems like a tall order, ramping up expectations for the Florence information day." He cautioned that "Unless management (or, perhaps, President Trump) somehow pulls a large rabbit out of the hat later this week, we believe the reality, and difficulty, of brand turnarounds will start to set in, leaving Kering at risk of taking another swing on the brand turnaround yo-yo."
Citi analyst Thomas Chauvet echoed these concerns, stating, "Luxury brand turnarounds have become more complex, slower, costlier, and far less public-market-friendly than in the past." Analysts were particularly keen on gaining "greater clarity on the product roadmap and upcoming launches, how the new creative direction is translating into merchandising discipline, progress on store rationalization, and a more explicit framework for addressing the divergence between the U.S. and China," as noted by Oliver Chen.
Challenges and the Road Ahead
Kering’s "ReconKering" plan is an ambitious declaration of intent, aiming to navigate a challenging luxury landscape characterized by shifting consumer preferences, intense competition, and macroeconomic uncertainties. The strategy seeks to address the foundational issues that have impacted the group’s performance, particularly at Gucci, which for years served as its primary growth engine.
The success of de Meo’s vision will hinge not only on the clarity of the strategy but, crucially, on its disciplined execution. The long timeline for achieving its ultimate goals by 2030 means Kering will face sustained pressure from investors expecting tangible progress in the short to mid-term. The commitment to doubling business with top-tier clients, who already account for roughly a quarter of luxury consumption, highlights a focus on high-value consumers as a pillar of future growth.
As Kering embarks on this profound transformation, the luxury world will be watching closely to see if "ReconKering" can indeed reconnect the group with its unique strengths, revitalize its iconic brands, and ultimately reclaim its leadership in the evolving definition of "Next Luxury." The path ahead is fraught with challenges, but the detailed roadmap and the renewed emphasis on excellence and execution offer a glimpse into a potentially brighter future for the luxury giant.
