European luxury stocks surged Tuesday as investors embraced restructuring optimism surrounding Kering, the owner of Gucci. The fashion house’s parent company saw shares jump over 10%, building on momentum since CEO Luca de Meo took office in June. De Meo has prioritized debt reduction and governance overhaul, recently offloading Kering’s beauty division and brand licenses to L’Oreal for $4.4 billion. Despite a 3% year-over-year sales decline in Q4—a smaller drop than the 5% analysts predicted—investors remain bullish on the turnaround strategy.

Peer companies, including LVMH (+0.24%) and Richemont (+11.01%), also rose, though to a lesser extent. Kering’s rivals, such as Richemont (owner of Cartier) and PPR (parent of Puma), saw gains of 3.1% and 0.8%, respectively. The market’s focus hinges on Gucci, which has endured a decade of declining sales but showed resilience in Q4, with the slump less severe than feared. All eyes now turn to Milan in late February, where new creative director Demna Gvasalia will debut his first collections, a pivotal moment for Kering’s recovery.

De Meo’s restructuring efforts have already drawn attention for their boldness, including streamlining operations and targeting margin improvements across brands. While Gucci’s 10% sales drop over the past quarter marks its 10th consecutive decline, the slower pace of contraction suggests stabilization. Analysts note that currency-adjusted sales figures mask underlying challenges, yet de Meo’s track record at Renault lends credibility to his vision.

The rally underscores broader confidence in European luxury’s resilience amid economic headwinds. With Kering’s strategic pivot and Gucci’s cultural reset under Demna, the sector’s recovery hinges on balancing tradition with innovation. Investors will closely monitor Q1 results and the Milan show’s reception, which could signal whether the turnaround gains traction.