Kering (EU:KER) has outlined plans to significantly improve profitability, with chief executive Luca de Meo committing to more than double the group’s operating profit margin as part of a broader turnaround effort aimed at restoring both financial performance and brand strength.
Despite the announcement, shares slipped nearly 2% in early trading in Paris.
The group is targeting a substantial uplift from last year’s 11% recurring operating margin, bringing it closer to industry peers. Kering said it expects to complete a structural reset by the end of this year, with a return to sustainable growth anticipated by the end of 2028.
De Meo, who took the helm in September after a career in the automotive sector, presented the strategy during a capital markets day, addressing ongoing challenges linked to softer demand for luxury goods.
Gucci, the group’s flagship brand, has been particularly affected and is undergoing a repositioning under new management and creative leadership.
“The House is reshaping its product architecture across categories – from a strengthened leather goods offer to more coherent ready to wear, shoes and jewelry – supported by higher quality standards,” the company said.
Earlier in the week, Kering reported an 8% decline in Gucci sales for the first quarter, partly reflecting the impact of the Iran conflict on Middle Eastern demand and international tourism. Retail sales in the region fell 11% overall, despite stronger trading earlier in the quarter before tensions escalated at the end of February.
On capital allocation, Kering confirmed it plans to maintain a dividend payout ratio of around 50% of recurring net income, while aiming to lift return on capital employed above 20% over the medium term.
The group also signalled a cautious stance on acquisitions, saying it will adopt a highly selective approach, prioritising product quality and supply chain resilience.
Chiara Battistini of JPMorgan noted that the update offered limited near-term detail, stating it was “light on near-term quantified guidance, with no explicit revenue or margin targets for FY26 or FY27.”
“The three-phase sequencing, with the structural reset not completing until year-end 2026, sustainable growth only materialising by year-end 2028, and leadership “reclaimed” by 2030, suggests that the turnaround will take considerably longer, back end loaded, and require significantly more heavy lifting, than the bulls would hope for,” she added.
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