Luca de Meo's magic potion

Luca de Meo's star signing as CEO of the French luxury goods group Kering, owner of iconic brands such as Gucci, Saint Laurent, and Balenciaga. The current CEO of Renault has spent his entire career in the automotive world, where he has become one of the most highly regarded executives. Just over a month ago, when he presented his book , *Dictionary of the Sentimental Automobile* , in Barcelona, ​​he recalled that he actually started at Renault and that he has also worked at Fiat, Toyota, Volkswagen, and Seat in Barcelona, ​​where he left a fond memory and conceived the birth of the Cupra brand. In his book, de Meo defends the "emotional dimension" of the automobile and recalls that as a child he decided to dedicate his life to this world when he was able to take a ride in a Lancia Fulvia driven by the great Italian racing driver Arnaldo Cavallari. A man in love with cars who has triumphed in the sector. What led François-Henri Pinault, the owner and chairman of Kering, to choose him for a world as fundamentally different as that of luxury?

It may seem like a strange, if not daring, move, but the latest report from the luxury consulting firm Bain points to a sound decision in an industry that tends to operate on a very closed circuit. Because although very different, the automotive and luxury sectors face similar challenges: a declining market and severe pressure on their margins.

De Meo's reputation as a skilled manager has been solidified in recent years at the helm of Renault, a group he has managed to turn around since joining in July 2020. Renault was in a slump following the dramatic departure of Carlos Ghosn a year earlier, but the Italian executive managed to revive the company. Share value has practically doubled since his arrival, while operating profit has gone from a negative figure to a record 7.6% last year.

A motor man Kering has signed Renault's CEO, a star in the automotive industry, to turn around the French luxury goods group.

De Meo himself has publicly joked that he's found the secret to Asterix and Obelix's magic potion to fix Renault's problems. In a May interview with La Vanguardia, he explained that the ingredients are actually available to everyone: "A lot of work and a lot of common sense, because in the end, many organizations tend to lose their common sense." De Meo has resized the group, a system designed to build more than 5 million cars despite the fact that "we've never sold more than 3 million or so," he noted. And, on the other hand, he has reinvested in the product, which he considers "the foundation of everything, because with a good product, everything works."

Whether this magic formula can be applied to Kering as such remains to be seen. Probably in part, although some adjustments will have to be made. The French luxury group is going through a tough patch, dragged down by a global slowdown in the sector after years of strong growth. Its revenue increased by around 30% between 2018 and 2022, fueled by the boom in demand for luxury goods in China and thanks to the success of the Gucci brand. Since then, however, Gucci—which contributes around half of the group's revenue and two-thirds of its operating profit—has been declining. Saint Laurent, Kering's second-largest brand, is also struggling. Last year was particularly difficult. The group's revenue as a whole fell 12%, while profits fell 62%. With the announcement of Luca de Meo's arrival, Kering's stock market rose almost 12% last Monday, although it has since fallen again and is now down 77% since the summer of 2021.

A particularly difficult situation in the luxury sector, which, after some very successful years, has lost 50 million customers by 2023, according to Bain estimates, largely due to China's slowdown. The consulting firm forecasts a market decline of between 2% and 5% this year, figures it considers moderately positive given the current context: with three wars underway, the uncertainty created by Trump's tariff policy, and low growth in major economies, the situation doesn't seem so bad.

Ingredients The Italian manager emphasizes that the formula for success has little secret: "A lot of work and a lot of common sense."

Pinault is now betting everything on the new CEO and his magic potion. De Meo is, in his words, “not only a great promoter, but also has a deep understanding of the value chain. He will apply that knowledge here and bring his new perspective.”