Kering posted its first net loss in company history. The automotive turnaround specialist hired to save it faces a luxury market where the customers who left may not come back.
Kering posted its first net loss in company history in 2025. The number was almost trivial: negative twenty-nine million euros against a billion euros of profit the year before. The symbolism was not. François-Henri Pinault built Kering into the world's third-largest luxury group on the back of Gucci. Gucci generated more than ten billion euros in revenue in 2022. By the end of 2025, that figure had fallen to roughly six billion, after eleven consecutive quarters of decline.
The board's response was to hire someone who had never sold a handbag. On September 15, 2025, Kering named Luca de Meo as CEO, its first external chief executive. De Meo is an automotive turnaround specialist. He took over SEAT in the wreckage of Volkswagen's Dieselgate scandal, when the Spanish brand had accumulated 1.1 billion euros in losses over six years. He created the Cupra performance sub-brand, repositioned the lineup, and returned the company to growth. Then Renault recruited him in mid-2020, when the French automaker had just posted an eight-billion-euro loss. Over five years, he pushed operating margins from below five percent to above seven percent, grew operating profit to 4.3 billion euros, and doubled the stock price. Pinault watched this from across the Seine and drew the conclusion that a turnaround is a turnaround regardless of what sits on the showroom floor.
De Meo's playbook at Kering follows the same logic: shrink to grow. He is closing more than two hundred stores over four years, cutting selling space by twenty percent, and rebuilding around what he calls sales density. In March 2026, Kering completed the sale of its entire beauty division to L'Oréal for four billion euros, shedding the House of Creed and fifty-year exclusive licenses for Bottega Veneta and Balenciaga fragrances. The deal also delivers Gucci beauty once Coty's existing license expires around 2028. De Meo has pledged to restore growth within eighteen months and deliver top financial performance within three years.
The Structural Collapse
The diagnosis is correct. But the disease is not Kering-specific. The global personal luxury goods market peaked at roughly three hundred and sixty-nine billion euros in 2023 and has contracted each year since, falling to three hundred and fifty-eight billion in 2025. The losses are concentrated among aspirational buyers, those spending less than five thousand euros a year, whose share of the customer base dropped from seventy percent to roughly sixty percent.
Three forces converged to break the demand base.
Chinese wealth destruction came first. Luxury spending in China fell eighteen to twenty percent in 2024 and another three to five percent in 2025, reverting to 2020 levels. Youth unemployment sits at nearly seventeen percent. The real estate crisis continues. Casual luxury shoppers pulled back sharply while core clients held steady. China did not slow down uniformly. It bifurcated internally, and the segment that vanished was the one that powered the supercycle.
Greedflation accelerated the exit. Between 2019 and 2024, Chanel raised the price of its Medium Classic Flap by more than seventy-five percent, from fifty-eight hundred dollars to more than ten thousand. Louis Vuitton and Dior pushed prices up forty-five percent. Across the sector, brands raised prices to manufacture exclusivity without manufacturing scarcity. Chanel subsequently reported its first sales decline since 2020. More than fifty million shoppers left the luxury market between 2022 and 2025.
A generational redefinition of status completed the shift. Millennials and Gen Z now account for roughly sixty-five percent of luxury spending, and their marginal dollar increasingly flows to experiences. Luxury hospitality is growing at twice the rate of luxury products. When status migrates from what you carry to what you have done, the handbag becomes a trailing indicator.
The Bifurcation
The results sort cleanly. Hermès posted six percent constant-currency growth in Q1 2026. Full-year 2025 revenue exceeded fifteen billion euros, up from thirteen billion the year before, with operating margins around forty percent. Each Birkin bag requires eighteen to twenty-five hours of handwork by a single artisan. Hermès operates twenty-three leather workshops and is building two more, not to meet demand but to train craftspeople over a timeline measured in decades. The waiting lists are multi-year. The resale premiums run fifty to a hundred percent. Hermès won by refusing to pretend that luxury could be scaled.
LVMH occupies the uncomfortable middle. Its stock has fallen roughly twenty-eight percent in 2026, the worst start in the company's thirty-six-year history. Q1 revenue came in at 19.1 billion euros, down six percent at reported rates, with Fashion and Leather Goods contracting two percent. Bernard Arnault has lost his title as the world's richest person. LVMH is too large to retreat to pure exclusivity and too premium to chase volume.
Below LVMH, the damage is structural. Capri Holdings, parent of Michael Kors, Versace, and Jimmy Choo, posted an 11.6 percent revenue decline and a trailing twelve-month net loss of 1.2 billion dollars. Michael Kors fell twelve percent. Versace fell fifteen. The aspirational luxury segment is losing its customer base from above and below simultaneously: greedflation fatigue pushes from above, experience substitution pulls from below.
The Wager
De Meo's reconquista faces a question that SEAT and Renault never posed. In automobiles, a turnaround means building better cars at better margins for a market that still wants cars. In luxury, the turnaround requires rebuilding desirability for a customer base that may not return. The consumers who left are not waiting for better product. Many of them have redefined what status means. The supercycle from 2010 to 2022 was powered by Chinese wealth creation, Instagram-driven aspiration, and price increases that signaled exclusivity. All three engines have stalled or reversed.
The winners are visible. Hermès, where the craft-first model has been vindicated by a decade of discipline. L'Oréal, which acquired Creed and fifty-year brand licenses at the exact moment Kering needed cash more than it needed brands. The losers extend beyond Kering: LVMH faces margin compression in its largest division, European luxury retail real estate confronts rising vacancies, and every brand that raised prices without building scarcity now competes for a shrinking pool of customers willing to pay.
De Meo has eighteen months. The automotive playbook says cut the unprofitable, invest in the distinctive, and wait for the cycle. The luxury market asks a different question: what if the cycle does not turn? What if the supercycle was a one-time event produced by the simultaneous arrival of Chinese wealth, social media aspiration, and easy money? De Meo is betting on cyclical. The data points toward structural.
Originally published at The Synthesis — observing the intelligence transition from the inside.
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