Kering, the luxury group behind iconic brands like Gucci and Bottega Veneta, is reportedly nearing a deal to sell its beauty division to L’Oréal for approximately €4 billion. This move comes as the new chief executive, Luca de Meo, aims to rejuvenate the struggling company.
The potential sale marks a significant shift in strategy for Kering, which had previously focused on developing its beauty segment in-house rather than outsourcing it. Under former CEO François-Henri Pinault, who continues to serve as chair, Kering made bold investments in its beauty division, including a €3.5 billion acquisition of renowned perfumer Creed.
The news of the impending sale first emerged from the Wall Street Journal, although Kering has yet to comment on the matter. L’Oréal, a frontrunner in the beauty sector, is poised to benefit from additional brands under its portfolio if the deal finalizes, potentially expanding its offerings in cosmetic and skincare lines for Kering’s luxury labels. Currently, the beauty license for Gucci is held by Coty, extending until 2028.
Kering has experienced a downturn in performance, particularly with Gucci, which has faced declining sales in recent years. This has led to a series of profit warnings and a 15 percent drop in revenues for the first half of the year. Operating margins has also contracted significantly. Kering’s financial clouds are compounded by a rising debt, which reached €9.5 billion in June, largely due to its aggressive acquisition strategy and real estate purchases.
De Meo, who transitioned from the automotive industry at Renault, is now tasked with steering Kering through a challenging economic landscape while addressing its debt issues. His leadership is seen as crucial as the luxury group needs to reorganize and reposition its brands to regain its standing in the luxury market.
Since De Meo’s appointment was announced in June, Kering’s shares have surged nearly 80%. Under his guidance, the market value of the company is approximately €38 billion, having gained 30 percent over the past year. Shareholders are keenly aware of the necessity to streamline operations and reduce debt as part of a broader strategy to regain profitability and competitive edge.
De Meo’s experience in the automotive sector has raised eyebrows within the luxury industry, but his successes at Renault in revamping product lines and reducing costs may translate well into his current role at Kering. As the company navigates through this critical transition, it remains to be seen how effectively he can implement changes and restore the brand to its former glory.
