Luxury conglomerate Kering is launching a sweeping restructuring effort to revive profitability amid a slumping luxury market. The ReConKering strategy, set to conclude by 2030, targets operating margins of at least 22%—a level not seen since the brand’s heyday. The plan follows a €1bn inventory reduction by 2026 and a focus on streamlining debt, with operating profit down two-thirds over two years due to Gucci’s 8% sales drop in Q1 2024.

Gucci, which generates two-thirds of Kering’s operating profit, has underperformed forecasts, with shares falling 3% post-announcement. New CEO Luca de Meo, a turnaround specialist recruited from Renault, aims to merge “challenger agility” with luxury desirability. The strategy includes supply chain overhauls, inventory discipline, and 5-6% revenue reinvestment to boost returns.

The luxury sector’s 2023 downturn, marked by weak demand and geopolitical instability, has hit Kering harder than peers. Its debt levels have surged from aggressive acquisitions, prompting a shift toward selective investments. Analysts note the plan’s success hinges on balancing brand diversity with operational rigor, a challenge amid ongoing market headwinds.

Kering’s move underscores the luxury industry’s struggle to adapt to post-pandemic consumer shifts. If successful, the strategy could stabilize valuations, but failure risks deeper market share losses. Investors watch closely as de Meo bets on execution discipline to revive one of France’s most iconic fashion houses.