Gucci owner Kering sells beauty arm to L'Oreal in €4-billion deal to cut debt
Paris: Gucci-owner Kering has sold its beauty business to French beauty giant L'Oreal in a 4-billion-euro deal, media reports said.
According to a Reuters report, this is the first strategic move by Kering’s new CEO, Luca de Meo, that will help cut down the company’s debt pile.
The deal will give L'Oreal Kering's fragrance line, Creed, along with rights to make fragrance and beauty products for 50 years under exclusive Kering's fashion labels, including Bottega Veneta and Balenciaga.
"The proceeds will strengthen the balance sheet and support deleveraging, adding to the 1 billion euro reduction in net debt already achieved in the first half of 2025," Juliane Barthold and Stoyan Toshev from Frankfurt-based brokerage Metzler told Reuters in an email.
Royalties from these brand licenses will ensure a continuing income stream from the beauty segment for Kering, they added.
The report noted that de Meo’s move is a major shift from one of his predecessor Francois-Henri Pinault, who acquired Creed in 2023 for 3.5 billion euros in 2023.
Just two months into his new role, de Meo cut the piling debt by selling the luxury perfume brand Creed to L’Oréal.
Kering's net debt stood at 9.5 billion euros at the end of June, on top of 6 billion euros in long-term lease liabilities, the report said.
Analysts have lauded L'Oréal for the deal, which will be the company's largest acquisition to date.
Investors have welcomed the move as shares of Kering jumped 4.8% on on Monday while L'Oreal rose 1.2%.
Commenting on the deal, de Meo told the Financial Times on Monday that "you'll see others", adding that his priority was to focus on the areas where Kering has "critical size and skills". The paper also cited de Meo as saying he won't "close the door" on a potential sale of Kering's eyewear division, the other pillar of the company's recent diversification push.
Creed is one of the most exciting brands in the growing luxury fragrances area, the report quoted analysts as saying.
The French luxury group Kering, which owns brands like Gucci, Saint Laurent, and Balenciaga, created a new beauty division in 2023.
It acquired the perfume brand Creed, a well-known, high-end fragrance maker, to kickstart the beauty business.
By entering the beauty business, Kering wanted to diversify instead of relying almost entirely on Gucci.
Gucci accounted for 44.5% of its revenue and 63% of its operating income in 2024.
Despite that plan, Kering has not been able to grow its beauty division quickly, failing to cover operating expenses.
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