The French luxury conglomerate Kering, experiencing difficulties for some time, is reportedly nearing an agreement to divest its cosmetics arm — estimated at US$4 billion — to fellow beauty industry leader L’Oréal, the world’s largest, according to information from The Wall Street Journal.
When asked by AFP, Kering chose not to comment, while L’Oréal has yet to issue a response.
The U.S. business publication indicates that a formal announcement might occur as early as the following week, assuming discussions don’t break down or an alternative buyer does not emerge.
The news surfaces a mere month following the appointment of Kering’s new chief executive officer, Luca de Meo, aged 58. He is charged with revitalizing the organization, which has faced headwinds in recent years due to the performance of its primary label, Gucci.
“The present circumstances (…)bolsters our resolve to take action immediately,” Luca de Meo stated upon his induction on September 9. “This necessitates unambiguous and firm decisions,” he cautioned. “We must persist in diminishing our liabilities, lowering our expenditures. And where appropriate, streamline, restructure, reposition certain brands within our portfolio,” de Meo conveyed.
The Creed jewel
The disposal of the cosmetics segment — initiated in 2023 with the aim of diversifying income streams and encompassing the Creed fragrance marque acquired that year for EUR 3.5 billion – would represent a notable action by the incoming CEO.
Kering Beauté was designed to expedite the growth of brands like Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato, and Qeelin within the beauty and personal care market. The group also invested in the specialized scent brand Matières Premières.
However, the perfumes and beauty products of Kering’s two most prominent fashion houses remain under license to other entities.
The right to produce and distribute Yves Saint Laurent fragrances and makeup has been with L’Oréal for a number of years and for a “very, very, very long time,” the organization’s head, Nicolas Hieronimus, informed AFP in February 2023.
Gucci’s fragrance and beauty license is currently managed by the U.S. corporation Coty and is projected to lapse within the next few years. “We anticipate that all avenues are being examined, since, with the exception of Creed — which generates significant profits — the remaining assets, including Bottega Veneta, Balenciaga, and supplementary fragrances, presently account for only minimal contributions,” HSBC analysts mentioned in a report from mid-September. They further suggested that Kering could “either prolong its alliance with Coty or opt for a more vibrant associate for its leading brand, Gucci.”
Reducing debt
A total sale of the beauty business could assist Kering in lessening its debt burden, which totaled EUR 9.5 billion in July.
The enterprise, strained by challenges at its Gucci brand and a worldwide slowdown in the luxury goods sector, is facing continuous difficulties. In July, it disclosed a 46% decrease in first-half net earnings to EUR 474 million, together with a 16% reduction in income to EUR 7.6 billion.
