By Tassilo Hummel and Lisa Jucca

(Reuters) -Francois-Henri Pinault's decision to hire Renault boss Luca de Meo is an audacious but necessary move to address the twin challenge of sagging sales and mounting debt at luxury group Kering, investors and industry players say.

De Meo's turnaround credentials were enhanced by his work at French carmaker Renault, but he has much to do if he is to replicate the successes of cross-sector heavyweights such as Robert Polet and Leena Nair.

Pinault, son of founder Francois and CEO of Paris-listed Kering since 2005, has struggled to contain a deepening rot at star brand Gucci while embarking on a shopping spree that has stretched the French conglomerate's balance sheet and that of controlling family holding Artemis.

By stepping aside to let de Meo run a luxury sector giant, Pinault has acknowledged the urgent need to address Kering's problems, including the 75% drop in its value since the summer of 2021, according to Reuters conversations with industry experts and investors.

"It's a bold move ... We now have a CEO (de Meo) who is a great professional," said Ariane Hayate, European equity fund manager at Edmond de Rothschild.

"There's now a real willingness by Francois-Henri Pinault to take a step back after years of underperformance."

Kering confirmed in a statement on Monday it had picked de Meo as CEO and that he would start in his role in September. Pinault, who told analysts he had met de Meo only a few months earlier during the recruitment process, would retain the role of chairman.

"I will be fully involved in the strategic orientation of the group as chairman," Pinault said. "But I won’t step in and short circuit the new CEO in terms of priorities or key appointments."

Kering's share price rose nearly 12%, its best daily performance since 2008.

The group's swoop for de Meo also suggests that its problems are bigger than perceived from the outside and go beyond Gucci, said one large European investor on condition of anonymity in discussions relating to individual investments.

Despite his lack of experience in the luxury sector, de Meo does bring skills that can help Kering at this critical juncture, industry players say.

Having successfully managed a turnaround at Renault, he is likely to accelerate a Kering cost-cutting push that includes store closures, real estate sales and redundancies to reduce its more than 10 billion euros ($11.6 billion) of net debt, according to two industry players and one person who knows him.