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Investing.com -- Kering SA (EPA:PRTP) shares fell over 3% on Wednesday after Reuters reported that Chief Executive Luca de Meo has told senior staff the company must shrink its store footprint, reduce its reliance on Gucci and pursue broader synergies across the group, according to a memo it reviewed.
The memo, described by the report as a summary of a longer document titled “ReconKering,” offers the clearest view yet of de Meo’s turnaround plan less than a month after Kering struck a €4.7 billion deal to sell its beauty division to L’Oréal.
The report added that the company aims to raise cash and refocus on its core luxury fashion operations.
De Meo wrote that Kering “remains humble” and said his ambition is for the group to become “the undisputed challenger in luxury” within five to ten years, the report said.
The company has been hit by a double-digit sales decline at Gucci, its main profit driver, while debt has mounted through acquisitions.
According to the report, de Meo set an 18-month deadline to return all brands to growth and estimated it would take three years to restore what he called “top financial performance.”
His memo says Kering, which has closed 55 stores in the past year, needs to continue downsizing its retail network and reassess its pricing and product mix after years of price increases.
The report said that de Meo warned of an “overdependency” on Gucci and said the group must accelerate the development of Saint Laurent, Bottega Veneta and Balenciaga.
The jewellery division, which has struggled to scale and compete with rivals at LVMH and Richemont, should pursue more synergies, the memo said.
Among the brands mentioned for development was Brioni, though the report noted that both Brioni and Alexander McQueen have been the subject of divestment speculation.
Kering said in a statement that de Meo laid out the foundations of its future strategy upon taking over in September and that these have been communicated internally. The group plans to present its full strategy to investors next spring, the report added.