Kering closes in on €4bn deal to offload beauty division to L’Oréal
Sale represents first big restructuring move by chief executive Luca de Meo
Gucci owner Kering is close to striking a deal to sell its beauty division to L’Oréal for about €4bn as its new chief executive looks to revitalise the struggling luxury group.
The potential sale, which was confirmed by people familiar with the matter, would represent a U-turn by the Paris-listed company, which had previously sought to grow its beauty business in-house.
It is also one of the first big restructuring moves by new chief executive Luca de Meo, who arrived in September from carmaker Renault with a mandate to turn around the flagging business.
Kering’s shares have risen almost 60 per cent since de Meo’s appointment was announced in June.
The decision to build a beauty division at Kering rather than license it out to partners had been a big strategic move in 2023 by former chief executive François-Henri Pinault, who remains chair of the group.
The initiative led to expensive acquisitions including a €3.5bn deal to buy perfumer Creed.
The potential sale of Kering’s beauty division to L’Oréal was first reported by the Wall Street Journal. Kering declined to comment. L’Oréal did not immediately reply to a request for comment.
L’Oréal, the sector leader, owns dozens of brands ranging from Maybelline to Prada and Saint Laurent’s beauty licences. If a deal is struck, it would allow L’Oréal to develop new cosmetic and skincare lines for Kering-owned brands such as McQueen and Bottega Veneta.
The beauty licence for Gucci, Kering’s biggest brand by sales and profits, is contracted out to Coty until 2028.
Kering is one of the world’s biggest luxury groups but has lagged behind peers as Gucci’s performance has plummeted in recent years.
A stalled turnaround and leadership churn led to Kering issuing multiple profit warnings last year. Sales at Saint Laurent, its second-biggest brand, have also fallen in recent quarters.
In the first half of the year, Kering’s revenues declined 15 per cent on a like-for-like basis, while operating margin declined 470 basis points to 12.8 per cent compared to last year.
De Meo is now tasked with overseeing a turnaround while cutting the group’s debt pile, which hit €9.5bn in June following a series of high-priced deals and real estate purchases.
Kering’s shares have risen 30 per cent in the past year, giving it a market value of €38bn.
“We will have to continue to reduce our debt and, where necessary, rationalise, reorganise and reposition some of our brands,” De Meo told shareholders in September.
The Italian executive has spent his career in the car industry, raising questions about how that experience would translate to the rarefied world of luxury.
During his tenure at Renault, which began in 2020, de Meo was credited with strengthening the carmaker’s product range and stripping out costs, helping to almost double its share price before his surprise departure.