Luxury fashion giant Kering (owner of Gucci) has agreed to sell its beauty unit to L’Oréal for 4 billion euros ($4.7 billion). This move is seen as a key part of new CEO Luca de Meo’s strategy to reduce the company’s high debt burden and refocus the company on its core fashion brands.
Under the agreement, L’Oréal will take over the Creed perfume brand, which Kering acquired for 3.5 billion euros in 2023.
Additionally, it will acquire exclusive perfume and beauty product manufacturing rights for brands such as Bottega Veneta, Balenciaga, and Gucci for 50 years. The Gucci license will take effect after Kering’s current collaboration with Coty expires in 2028. According to analysts, “Selling at a similar price to what was paid for Creed is a painful but necessary step.” This sale will be L’Oréal’s largest acquisition to date and will further strengthen the company’s position in the luxury perfume market.Major Milestone in Kering’s Debt Reduction Plan
Kering has 9.5 billion euros in net debt and 6 billion euros in long-term lease liabilities.
This sale is critical to strengthening the group’s financial structure and boosting investor confidence.Kering had aimed to reduce its dependence on Gucci with the beauty unit it established in 2023. However, this initiative fell short of expectations, reporting a loss of €60 million in the first half. At the same time, Gucci’s sales decreased by 25% due to falling demand in China, which put additional pressure on the company.
New CEO De Meo said upon taking office that he would make “difficult but necessary decisions”.
In this context, the company has postponed the full acquisition of Valentino and plans to raise cash by selling some of its real estate.Strategic Gain for L’Oréal
L’Oréal, the producer of brands such as Maybelline and CeraVe, aims to accelerate its growth in the luxury segment with this acquisition. The company’s perfume sales showed a double-digit increase in the second quarter of 2024.
Experts state that with this agreement, L’Oréal will gain “access to Kering’s prestigious but underdeveloped brands“. It is also noted that L’Oréal has gained an advantageous negotiating position against Kering, which is under time pressure.
