Kering on Thursday unveiled “ReconKering,” a reboot plan aimed at restoring “the clarity of vision” of the troubled French luxury group and regaining its “desirability” and “a leading position.”
The strategy, which was drawn up by the new CEO Luca de Meo, was eagerly awaited given the company’s ongoing weakness for years. In particular, Gucci’s weak development is putting a strain on the group. Kering’s plan runs until 2030 and does not contain any radical measures.
The goals include, among other things, more than doubling the operating margin in the “medium term” and increasing it to at least 22 percent, although without specifying an exact time frame. For comparison: This would roughly correspond to the margin level of the French competitor LVMH. According to the plan, Kering will enter a phase of “renewed and sustainable growth” “by the end of 2028”.
The group, which initiated a transformation last year under the leadership of the Italian Luca de Meo, also intends to invest five to six percent of its sales in the sustainable organic development of its brands and is considering targeted acquisitions.
Another key performance indicator is ROCE (Return on Capital Employed), which the company wants to increase to over 20 percent. This key figure, which is rarely explicitly published by large corporations, measures profitability in relation to the capital employed.
In addition, Kering is aiming for faster revenue growth than the market, which it describes as “incremental outperformance,” without providing further details.
“Desirability” in focus
At the heart of the strategy is “desirability”, i.e. the ability of products to convince customers – a concept that Kering highlights as “the key to future growth”. The group therefore wants to systematically measure the “brand image of each individual brand” in order to enable the companies to track their development, compare themselves with competitors and derive targeted measures.
First and foremost is Gucci, the group’s most important brand, whose difficulties have had a significant impact on business figures in recent years.
Although the Italian fashion house now has a new CEO, Francesca Bellettini, and a new creative director – Demna Gvasalia presented his first collection in autumn – the success of this realignment has yet to be confirmed.
In the first quarter, Gucci’s sales fell 14 percent. Kering’s total revenue fell six percent over the same period, but remained stable on a like-for-like basis. The brand, which generates around 40 percent of group sales, is expected to become more attractive again, particularly through a strengthened range of leather goods with higher quality standards.
“More targeted local strategies and an optimized distribution model allow the brand to be more relevant in its markets, strengthen its exclusivity and increase its speed of execution,” said Kering.
In addition, the company is examining acquisitions “which are primarily aimed at strengthening know-how, expanding vertical integration and securing the supply of raw materials,” but without providing information on the possible investment volume.
The announcement was made ahead of a morning presentation by Luca de Meo to investors in Florence, the birthplace of Gucci.
Like other companies in the industry, Kering has suffered from weakening demand in recent years, particularly due to weaker performance in China, one of the most important markets for luxury goods.
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