Kering said on the 20th (local time) that it will sell its entire beauty institutional sector to L'Oreal. Kering will pocket 4 billion euros (about 5.5 trillion won) in cash from the transaction. In return, it will effectively wind down its beauty business, including the famous fragrance brand Creed, in just two years. The move is seen as a bid to overcome a double whammy of massive liability and weakness at flagship brand Gucci.
For L'Oreal, the deal is the biggest acquisition in its 116-year history. With this deal, L'Oreal will own the perfume maker "House of Creed." The exclusive license to develop and distribute Gucci-licensed fragrances and beauty products—key fashion brand under Kering—will also transfer to L'Oreal for a 50-year term. L'Oreal also secured the Bottega Veneta and Balenciaga licenses.
The two companies also agreed to set up a 50-50 joint venture to seek business opportunities in wellness (health care) and luxury. The transaction is expected to close in the first half of 2026.
The sale shows that Kering Group's business strategy has completely changed. In 2023, Kering created a beauty division, saying it would directly oversee the beauty business like rivals LVMH and Hermes. In the same year, it acquired Creed for 3.5 billion euros (about 4.8 trillion won).
That strategy was reversed 180 degrees in just two years. In the meantime, flagship brand Gucci struggled with weaker demand in China, its core market. Gucci is now seen as having grown distant from consumers amid confusion over brand identity. Recently, Gucci named Francesca Bellettini as the new chief executive officer (CEO) in a bid to shake up the mood. Still, Gucci's latest quarterly sales remain down 25% from a year earlier. Kering's beauty division also posted an operating loss of 60 million euros (about 820 billion won) in the first half alone. The push into beauty to reduce reliance on Gucci instead became a conduit for cash outflows.
Aggressive fundraising also worsened the financial position. Kering's net liability stood at 9.5 billion euros (about 13 trillion won) as of the end of June. There is also long-term lease liability totaling 6 billion euros (about 8.2 trillion won). As liabilities ballooned like a snowball, investor concerns grew.
Major Italian outlets including La Repubblica reported that Luca de Meo, who took office last month as the new Kering Group CEO, personally led the sale. CEO de Meo is a marketing expert who drove a successful turnaround at French automaker Renault. Upon moving to the Kering Group CEO post, he made liability reduction and a focus on the core fashion business top priorities. Since taking office, he has put everything on the line to cut liability, delaying plans to acquire Valentino and moving to sell real estate equity. On the sale, CEO de Meo said it was "a decisive step to focus on what defines us best—namely, the creativity and desirability of our houses."
Analysts at Bernstein said, "Selling the entire beauty division at a level (4 billion euros) similar to the price (3.5 billion euros) paid for Creed two years ago is bitter but necessary medicine." The Financial Times (FT), citing experts, projected that the transaction "will help address the liability issue, one of investors' top concerns." Once the proceeds come in, Kering's net liability is expected to fall from 3.1 times to about 2 times earnings before interest, taxes, depreciation and amortization (EBITDA).
From L'Oreal's perspective, the acquisition is the largest since its founding. The previous record was $2.5 billion when it bought Australian beauty brand Aesop in 2023. L'Oreal plans to apply the success it already achieved with the Yves Saint Laurent (YSL) beauty license under Kering to the Gucci, Bottega Veneta and Balenciaga license businesses.
On the day, L'Oreal CEO Nicolas Hieronimus said, "There is ample room for improvement in beauty sales (600 million euros) compared with Gucci's fashion sales (7.7 billion euros)." The point is that the beauty institutional sector falls short of even one-tenth of its fashion reputation. CEO Hieronimus added that Creed's annual sales "can be increased to 1 billion euros, nearly tripling, within a fairly quick timeframe."