Kering, the French luxury group that owns Gucci, has agreed to sell its beauty division to L’Oréal for €4bn (£3.5bn), in a move aimed at reducing debt and refocusing on its core fashion business.
The agreement will see L’Oréal take ownership of Creed, the historic fragrance house founded in 1760, as well as secure a 50-year exclusive licence to develop perfumes and beauty products under Kering’s fashion labels Gucci, Bottega Veneta and Balenciaga. The arrangement will come into effect in 2028, once Gucci’s existing fragrance contract with Coty expires.
The sale marks the first major strategic shift under Kering’s new chief executive, Luca de Meo, who took charge less than two months ago. De Meo is seeking to ease investor concerns over the group’s financial position, with net debt standing at €9.5bn at the end of June, alongside €6bn in long-term lease liabilities.
Kering only established its beauty arm in 2023, following the €3.5bn acquisition of Creed, in an attempt to diversify beyond Gucci, which generates the bulk of its profits. However, the division has struggled to gain momentum, recording an operating loss of €60m in the first half of this year.
The group has also been grappling with a sharp slowdown at Gucci, where revenues fell 25% in the most recent quarter amid weakening demand in China. The brand has undergone significant upheaval, with creative director Sabato de Sarno dismissed just weeks before Milan fashion week in February. He has since been replaced by Demna, formerly of Balenciaga, who unveiled his first Gucci collection last month through a film directed by Spike Jonze.
Analysts at Jefferies estimate that the beauty division could have generated €800m in sales and €280m in operating profit, based on a 10% licence fee on Gucci products. They described the deal as a positive step for L’Oréal, which continues to expand in the buoyant fragrance market. Bernstein analysts, however, characterised the sale as “a bitter but necessary medicine”, noting that Kering is parting with the business for roughly the same price it paid for Creed two years ago.
Shares in Kering rose 5% in early Paris trading following the announcement, while L’Oréal gained nearly 1%.
