Kering sells its beauty division to L'Oréal to boost recovery

French luxury group Kering, which has been struggling for several years, is selling its beauty division to fellow French company L'Oréal for four billion euros. This move is expected to help reduce its debt and continue its recovery.

The news was first reported on Saturday by the Wall Street Journal. Kering is selling its beauty division, established in 2023 with the acquisition of luxury fragrance brand Creed for 3.5 billion dollars, to the global cosmetics leader L'Oréal.

The transaction is expected to be completed in the first half of 2026.

The agreement, detailed in a statement on Sunday evening, also includes “the establishment of 50-year licences for Kering's iconic brands” (Gucci, Bottega Veneta and Balenciaga). L'Oréal has held the Yves Saint Laurent licence since 2008.

The partnership includes “the rights to enter into an exclusive 50-year licence agreement for the creation, development and distribution of Gucci fragrance and beauty products, starting after the expiration of the current licence with Coty, in compliance with the Kering group's obligations under the existing licence agreement”. According to a note from HSBC analysts, the licence with the American company Coty expires in 2028.

Also included is an “exclusive partnership, planned as a 50/50 joint venture, which will create experiences and services combining L'Oréal's innovation capabilities and Kering's deep understanding of luxury customers”.

“The addition of these extraordinary brands perfectly complements our existing portfolio and significantly expands our presence in new, dynamic segments of luxury beauty (...) Gucci, Bottega Veneta and Balenciaga are all exceptional couture brands with enormous growth potential,” said L'Oréal's chief executive officer, Nicolas Hieronimus, in the statement.

Decisive step for Kering

“This strategic alliance marks a decisive step for Kering,” said its chief executive officer, Luca de Meo, in the statement. “This partnership allows us to focus on what defines us best: our creative power and the appeal of our Maisons.”

This announcement comes just one month after Luca de Meo took office. He is tasked with turning around the group, which has struggled for several years due to difficulties at its flagship brand, Gucci. Gucci alone accounts for 44 percent of sales and two-thirds of operating profitability but continues to go through a difficult period.

“The current situation (...) strengthens our determination to act without delay,” de Meo stated on the day of his appointment, September 9. “We will need to continue to reduce debt and, where necessary, streamline, reorganise and reposition some of our brands.”

In July, Kering announced a 46 percent drop in its first-half net profit to 474 million euros. Its sales plunged by 16 percent to 7.6 billion euros, and its debt stood at 9.5 billion euros.

This sale to L'Oréal should allow the group to reduce its debt. The four billion euros will be “payable in cash upon completion of the transaction, scheduled for the first half of 2026,” the statement specified. L'Oréal will also pay royalties to Kering for the use of the licensed brands.

The cosmetics group also holds the beauty licence for the house of Valentino. Kering acquired a 30 percent stake in Valentino in 2023, with an option to acquire 100 percent in 2028.

For its part, L'Oréal reported a 1.6 percent increase in half-year sales to 22.47 billion in July. Half-year sales for its luxury division grew by 1 percent to over 7.65 billion euros.

The cosmetics group was also mentioned in September in the will of Giorgio Armani. He asked his heirs to sell his empire in the medium term to a giant such as LVMH, L'Oréal or EssilorLuxottica. L'Oréal has held the Armani licence for fragrances and cosmetics since 1988.

This article was translated to English using an AI tool.

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