Shares of Gucci-owner Kering pop 10% on reports Renault’s de Meo to be next CEO

Shares of French fashion house Kering popped over 10% on Monday on reports that it has appointed industry outsider Luca de Meo as group CEO. It comes as the owner of beleaguered brands Gucci and Saint Laurent embarks on the latest phase of its turnaround effort.

Auto veteran de Meo’s departure as CEO of Renault was confirmed Sunday, with the French carmaker saying in a statement that he was stepping down “to take on new challenges outside the automotive sector.” He will remain in post until July 15.

De Meo’s move to Kering was first reported by French newspaper Le Figaro on Sunday. Kering declined to comment on the reports when contacted by CNBC.

Kering shares were trading up 10.3% by 9.45 a.m. London time as investors and analysts cheered the reports. Renault shares, meanwhile, shed 7%.

“Brand management and marketing are [de Meo’s] forte, which dovetails with what the luxury industry does,” Bernstein analysts wrote in a note Monday.

De Meo is seen as having a strong track record, having worked in the auto sector for over 30 years, including at Toyota, Fiat and Volkswagen. The Italian is largely credited with Renault’s turnaround during his five years at the helm, with shares up over 90% over the period.

The challenges facing the luxury sector nevertheless loom large, with Kering among the biggest laggards as shoppers have fallen out of love with its star Gucci label. Kering shares have shed over 60% in the last two years, sparked by a series of profit warnings and designer changes at Gucci.

Kering’s current CEO and chairman François-Henri Pinault, a member of the family that controls the group, has held the top jobs for two decades but is actively working on his succession, according to Reuters, citing sources. Pinault reportedly intends to split the roles of chair and CEO, according to the sources. It was unclear whether he will remain chair.

Thomas Chauvet, senior equity analyst at Citi, commended de Meo’s turnaround of Renault, including his embrace of technological innovation and the brand’s elevation. However, he noted that the challenges of the prospective new role would be significant.

“Execution of luxury brand turnarounds has become more complex, lengthy, costly, and far less public-market-friendly, reflecting consumer preference for top brands rather than those in transition and significant P&L disruption from greater investment commitment,” he wrote in a note.

“There is still a considerable amount of work ahead at Gucci and Saint Laurent … to rejuvenate both brands and generate a steady stream of revenue and cash flow for the group, which, if achieved, could result in significant multiple re-rating,” he added.

In April, Kering posted a worse than expected 14% year-on-year decline in first quarter sales and pointed to macroeconomic headwinds ahead. Sales at Gucci, which make up nearly has of group revenues, led losses, falling 25% on a comparable basis.