L’Oréal chief plans to more than triple sales of Gucci beauty products
French group will take on beauty licence for luxury brand next year after buying rights from owner Kering in €4bn deal
L’Oréal is aiming to more than triple sales of Gucci-branded beauty products after it takes over the licence next year, as the world’s largest beauty company shrugged off the impact of US tariffs to report record profit margins in the first half.
The French group acquired Gucci owner Kering’s beauty business, which also includes the Balenciaga and Bottega Veneta brands, for €4bn this year.
“Gucci has to become a multibillion-euro beauty brand,” L’Oréal chief executive Nicolas Hieronimus told the FT. “Gucci fashion is significantly bigger than the Saint Laurent fashion brand, and Saint Laurent beauty [generates revenues of] €3bn.” L’Oréal has operated the beauty licence for Saint Laurent since 2008.
Under the stewardship of current licence holder Coty, Gucci’s beauty range generated sales of about €600mn last year, according to a person with knowledge of the situation. That is about one-tenth of the revenues generated by Gucci’s fashion business last year.
Hieronimus said L’Oréal’s first Gucci beauty products would probably be released in 2028, after it takes over the licence in July next year.
The Paris-listed company has already put together a team that will begin work on the Gucci range in September, Hieronimus said, with an initial focus on developing make-up and fragrance products.
Hieronimus added the improvement in Gucci’s fashion sales reported this week by Kering, which has embarked on a major turnaround plan, augured well for the relaunch of the beauty range.
On Wednesday, L’Oréal reported half-year operating profit of €5.1bn, up 7 per cent compared with last year. The beauty group delivered a record operating profit margin of 21.3 per cent despite a drag from US tariffs, which reduced margins by 20 basis points. Hieronimus said he expected the impact would ease in the second half of the year.
Like-for-like sales rose 6.3 per cent in the second quarter on an adjusted basis for a total of €11.6bn, ahead of forecasts. The adjustment accounts for timing impacts related to an IT overhaul.
L’Oréal’s performance was boosted by double-digit sales growth in its professional products and dermatological beauty divisions. Sales at the group’s luxury division, its largest, grew 4.7 per cent on an adjusted basis, underpinned by double-digit growth at brands including Aesop and Creed.
Sales also picked up in China. Hieronimus said Chinese consumers were gaining confidence because of the improved performance of its domestic stock market over the past year, as well as the country’s technological prowess.
“Whether it is AI or robots, you really feel that the future is on display. I feel that at least part of the population feels very positive and excited about that,” he said.
The sales impact for L’Oréal from the war in the Middle East totalled €30mn in the second quarter due to lower spending in travel-retail destinations and the region’s high-end shopping malls.