Analysis-Gucci owner Kering bets on crisis specialist de Meo to lead revival

By Tassilo Hummel and Lisa Jucca

(Reuters) -Francois-Henri Pinault's reported decision to hire Renault boss Luca de Meo is an audacious but necessary move to address the twin challenge of sagging sales and mounting debt at luxury group Kering, investors and industry players say.

De Meo's turnaround credentials were enhanced by his work at French carmaker Renault, but he has much to do if he is to replicate the successes of cross-sector heavyweights such as Robert Polet and Leena Nair.

Pinault, son of founder Francois and CEO of Paris-listed Kering since 2005, has struggled to contain a deepening rot at star brand Gucci while embarking on a shopping spree that has stretched the French conglomerate's balance sheet and that of controlling family holding Artemis.

By stepping aside to let de Meo run a luxury sector giant, Pinault has acknowledged the urgent need to address Kering's problems, including the 75% drop in its value since the summer of 2021, according to Reuters conversations with industry experts and investors.

"It's a bold move ... We now have a CEO (de Meo) who is a great professional," said Ariane Hayate, European equity fund manager at Edmond de Rothschild.

"There's now a real willingness by Francois-Henri Pinault to take a step back after years of underperformance."

Kering's share price rose by more than 12% on Monday, on track for its best daily performance since 2008.

The group's expected swoop for de Meo also suggests that its problems are bigger than perceived from the outside and go beyond Gucci, said one large European investor on condition of anonymity in discussions relating to individual investments.

Despite his lack of experience in the luxury sector, de Meo does bring skills that can help Kering at this critical juncture, industry players say.

Having successfully managed a turnaround at Renault, he is likely to accelerate a Kering cost-cutting push that includes store closures, real estate sales and redundancies to reduce its more than 10 billion euros ($11.6 billion) of net debt, according to two industry players and one person who knows him.

De Meo will also need to address Kering's planned acquisition of the 70% of fashion brand Valentino that it doesn't already own. Kering bought 30% in 2023 for $1.9 billion and intends to buy the remainder in 2028.

The purchase from Qatari-backed luxury fund Mayhoola could cost a further 4 billion euros, Kering's annual report said.

Options included in the original deal might force Kering to buy the other 70% as early as next May, company filings show, which could require partial payment in Kering shares, Kering finance chief Armelle Poulou said in April.