In 1999 the French retailing giant PPR (formerly Pinault-Printemps-Redoute) jumped into the luxury-goods sector with the surprise acquisition of Gucci and Yves Saint Laurent. Since then, the company's founders, the Pinault family, have delivered one plot twist after another.

They stunned the fashion world in 2003 when they decided not to renew the contracts of Gucci's artistic director Tom Ford and chief executive Domenico de Sole, the pair who gained guru status for their spectacular turnaround of the limping design house in the mid-'90s. Then, earlier this year, François-Henri Pinault, newly installed as chief of Artémis, the family's holding company, caught industry experts off guard again. Although his father François Pinault had delegated the day-to-day running of his companies to a nonfamily chief executive, François-Henri announced he would be assuming the role of PPR's CEO, overseeing operations at the world's third largest luxury conglomerate.

PPR's stock price dipped on the news (though it recovered in the weeks that followed) as analysts questioned whether François-Henri was up to the job of running a $22 billion publicly traded company whose holdings—in addition to the brands within the Gucci Group—span the consumer retail sector, including the French department store Printemps, catalog giant La Redoute and the music-and-book chain FNAC. (Via Artémis, the Pinaults also own Christie's auction house, the Château Latour vineyard, leading French newsweekly Le Point, local newspapers, a soccer club and a Paris theater.) The move did, however, silence those who said François-Henri was merely his father's puppet.

Pinault père, who never finished high school and launched his empire from a sawmill in Brittany, France, in 1963, is famous for having grabbed opportunities when they came along, even when it meant completely redefining his business. Equipment leasing, office supplies, consumer credit—all were sectors Pinault bought into and later sold.

François-Henri spent his childhood in Rennes in Brittany and says he never felt any pressure to join the family company. After business school, he worked in various branches of the group, becoming president of FNAC in 1997. In an unusual arrangement, beginning in 1987, François Pinault organized a group of French business leaders to meet regularly with his eldest son to determine whether François-Henri was capable of succeeding him. Their conclusion was affirmative. "When my father turned over the holding company to me, he was 67 and in good health," notes François-Henri. "Ninety percent of company founders in his situation do not let go. He turned it over to me completely."

The younger Pinault comes across as friendly and polite, assured but not cocky as he talks about his plans in an interview in his office near the Arc de Triomphe. He even blushes slightly when asked about reports in the tabloids that say he has been squiring actress Nicole Kidman, whom he describes as merely a "good friend."

In less than three years, PPR has built a full-fledged luxury group with a mix of brands. In addition to the establishment Gucci and Yves Saint Laurent, the group acquired smaller brands including Bottega Veneta leather goods and accessories, Sergio Rossi shoes, Balenciaga fashion, Boucheron jewelry, various cosmetics and watch brands and two fashion start-ups: Alexander McQueen and Stella McCartney.

That's too many brands, too fast, say many industry experts, and they have urged PPR to sell off some of the smaller ones. In meetings with investors and journalists, François-Henri has been clear that the buying spree is over and that his job will be to consolidate the recent acquisitions and grow the existing businesses. Gucci had annual sales of $2.4 billion in 2004, and François-Henri and Gucci Group boss Robert Polet say they can double that figure over the next seven years, largely by expanding into emerging markets, without losing any of Gucci's luster. "The best guarantee to ensure the brand Gucci never goes mass is to have this multibrand strategy. It's the only way to develop a luxury-goods group over 10, 15 or 20 years," says Pinault. But he says even the smallest brands must perform, and PPR has set 2007 as its break-even deadline.

So far, he has been quick to slot new executives into key brand positions, including Valerie Hermann to run Yves Saint Laurent and Isabelle Guichot as president of Sergio Rossi—both of whom happened to be his classmates from business school. François-Henri says he is also eager to rethink the widely accepted luxury- business model—practiced by Louis Vuitton and Chanel, among others—that bans licenses and franchising. These kinds of opportunities made designers rich in the 1970s and '80s but became almost dirty words in the 1990s as companies sought to bring production of nearly all products in-house. François-Henri argues that it is "unrealistic" to develop young brands like Alexander McQueen and Stella McCartney on the new model.

"Luxury, when you think about it, is a very young industry where internationalization took place only in the last 15 years," François-Henri says. "This very monolithic vision—imposing the same collections everywhere in the world in stores that look exactly the same—was important for establishing the identity of brands. Now it's time to move to a new phase." He imagines Gucci stores where new merchandise arrives at least monthly. "It's not a question of imitating Zara and H&M," he says, referring to the fast-fashion chains. "We must be more in tune with our consumers' habits."