Kering Bets on "House of Dreams" to Diversify Beyond Gucci

Kering, the luxury conglomerate behind brands like Gucci, is poised to launch a new strategic unit called "House of Dreams." This initiative, spearheaded by new CEO Luca De Meo, aims to scout for and invest in promising up-and-coming brands, marking a significant step to diversify Kering's revenue streams and lessen its reliance on its struggling flagship brand, Gucci.

The "House of Dreams" unit, a core proposal in De Meo's strategic thinking, will be endowed with long-term capital to acquire stakes in, or partner with, emerging businesses. Documents seen by Reuters indicate that the unit will target areas such as experiential technology, Indian craftsmanship, and "culture-led" Chinese luxury. Kering officially registered the "House of Dreams" trademark in France in October, according to the National Institute of Intellectual Property (INPI) website.

This move is a central component of De Meo's wider strategy to revamp the $20 billion luxury group ahead of a major investor presentation planned for next spring. De Meo, who took the helm in September, has set a three-year timeline to restore Kering to "top financial performance." A critical objective is to address what he termed an "over-dependency" on Gucci, which currently accounts for roughly half of Kering's operating profit, a notable drop from two-thirds in 2022. The new unit is expected to "de-risk" exposure to Gucci and "rebalance" the weight of fashion in Kering's long-term profits.

The establishment of "House of Dreams" echoes similar strategies employed by rival luxury house LVMH and beauty giant L'Oreal, and draws parallels to De Meo's prior restructuring of Renault in 2021, where he created the innovation-focused "Mobilize" division. Furthermore, this internal scaling-up initiative comes at a time when Kering's high debt loads limit its capacity for large external acquisitions. De Meo's memo suggests an initial 90-day pilot phase for the unit, complete with a seed fund and a dedicated team, though the exact operational launch date remains unclear.

The timing of this strategic shift reflects profound changes within the luxury market. Wealthy shoppers are increasingly turning away from traditional luxury brands, partly due to years of aggressive price hikes, and are instead gravitating towards emerging niche companies. From buzzy Korean beauty brands to innovative Chinese jewellers, these new players are experiencing stellar growth. Additionally, consumer preferences are evolving, with more clients prioritizing experiences like wellness and fine dining over tangible luxury items such as handbags and dresses, according to a recent Bain study that projects a rebound in the over $400 billion global luxury market next year after a flat 2025.

In response to inquiries, Kering stated that its "number one priority" remains boosting growth by strengthening its existing brands. However, the group also acknowledged it is "preparing for all the possible futures of luxury, whether new business models, new services, or new geographies," describing the shared internal elements as "preliminary working assumptions" still subject to evolution. Following Reuters' report on De Meo's performance timeline, Kering shares fell by 3.5% on Wednesday, although the company's shares have rallied over 70% since De Meo was announced as CEO in June, reaching their highest level since July 2024.