It all started in mid-June. Rumors spread that Luca de Meo, the most bankable executive in the automotive sector, was leaving Renault for a new challenge: turning around the biggest of the three luxury giants, Kering. We have already written about this, but what interests us today is the stockmarket mechanics behind it all. Because no matter how you look at it, it's not the figures that explain the stock's comeback since July: Kering's P/E multiple is still far too high and its debt a little too heavy to justify such a rush. It's the narrative that matters.
Vista
For François Henri-Pinault, who knows the world of soccer well, the arrival of the Milanese player is the signing of the year, even if it has meant breaking the piggy bank to do so. Kering has several problems, in addition to the global slowdown in the luxury market: its flagship brand Gucci is adrift, the complementary brands that were hiding the misery have reached plateaus, the internal organization is much less efficient than that of its major rivals, and the size of its balance sheet is somewhere between penalizing and worrying. On top of all this - and this is fundamental to what is happening on the stock market today - several attempts at recovery have failed, as have the promises that went with them, of course.
Who is Luca de Meo? (And what is he?)
He is an executive from the ruthless and ultra-procedural world of the automotive industry. In other words, he is capable of responding to Kering's organizational issues while offering a profile that contrasts sharply with the failures of managers in the luxury sector. He is also an innovative executive who has successfully revitalized and modernized outdated automotive brands and adapted to consumer demands. For Kering, this means the prospect of its various brands being better able to respond to trends.
He is a charismatic leader, arriving with a track record of success at Volkswagen and Renault. Perfect for breaking the negative image that has stuck to Kering in recent years. Finally, Luca de Meo speaks five languages and is Italian. This latter point is far from anecdotal when you own brands such as Gucci, Balenciaga, Bottega Veneta, Brioni, and Pomellato.
Panem et circenses
To draw a parallel with ancient Rome, Kering's shareholders want bread (tangible results in terms of the company's operational recovery) and games (dreams, bling, iconic collections). Luca de Meo is probably one of those executives who best embodies both aspects in Europe today. His inexperience in the luxury sector was quickly seen as an advantage by analysts, who have confidence in his ability to adapt... and probably also in his Italian nature. He has already delivered a major ingredient for success for shareholders: hope.
Since the rumors and confirmation of De Meo, Kering has been crushing the competition.
As a result, Kering has jumped 56% since rumors of Luca de Meo's arrival began circulating. At the same time, the market and LVMH have gained 10%, Compagnie Financière Richemont is flat, and Hermès has lost 7%. The market isn't buying Kering, it's buying Luca de Meo's success at Kering. Sometimes, the stockmarket isn't just about numbers.
A highly variable valuation
Looking ahead, and in light of recent gains, investors will need to be pragmatic. The next earnings reports will likely be mediocre, and De Meo's only argument will be, "Obviously, I'm not going to turn the tables overnight. Give me time to work." He has no reason to rush, at the risk of fueling disappointment once again. Last week, the CEO announced the presentation of his roadmap for spring 2026. Until then, his task will be to continue to keep shareholders happy, even if the figures are not (yet) up to scratch. After all, if the company manages to return to the €3 billion in net profits it was generating two years ago, its valuation would appear quite attractive, even after a 56% increase in three months. That is the bet, this time a quantifiable one, that investors are making.
