Kering (EU:KER) saw its stock rise about 5% on Monday after announcing the sale of its beauty division to L’Oréal (EU:OR) for €4 billion. The move marks a strategic shift under new CEO Luca de Meo, aiming to streamline operations and strengthen the company’s financial position.
The agreement includes the sale of luxury fragrance house Creed—acquired by Kering in 2023—and grants L’Oréal exclusive rights for 50 years to produce and market fragrance and beauty products for Gucci, Bottega Veneta and Balenciaga once existing licensing deals, including Gucci’s partnership with Coty Inc. (expiring in 2028), conclude.
This deal effectively unwinds one of the most ambitious diversification strategies launched by former CEO François-Henri Pinault, who established Kering Beauté to push the group further into the lucrative beauty sector traditionally dominated by licensing partnerships.
The divestment comes at a critical time for Kering. At the end of June, the group’s net debt stood at €9.5 billion, alongside €6 billion in lease liabilities. Slower growth at Gucci—which accounts for more than half of group profits—particularly in China, has heightened investor concern around leverage.
The integration of Creed and the launch of in-house perfume lines, such as Bottega Veneta fragrances, failed to deliver the expected boost, with the division still loss-making in the first half of 2025. By selling the business rather than expanding it, de Meo is clearly signaling a shift back to a leaner model centered on fashion, operational efficiency, and cash flow.
For L’Oréal, this transaction is equally transformative. It gives the cosmetics group direct control of Creed and, in time, Gucci fragrances—one of the most valuable names in the global beauty industry. This will be L’Oréal’s largest-ever acquisition, surpassing its $2.5 billion purchase of Aesop in 2023, and reinforces its expansion into luxury fragrances. The two companies will also create a joint venture focused on wellness and longevity, extending their strategic relationship beyond licensing.
Market analysts welcomed the deal. UBS said the €4 billion valuation would be “a small positive for Kering,” helping address balance sheet concerns that have weighed on the stock this year. Deleveraging has become a key investor focus, particularly after delays in the Valentino transaction, and the sale could offset any impairment linked to the Creed acquisition.
Bernstein described the move as “bitter but necessary medicine,” suggesting that stepping away from in-house beauty will allow de Meo to concentrate fully on turning around Gucci. Analysts noted that Creed remains one of the most attractive assets in luxury fragrance and that the sale price appeared strong, but shareholder priorities have shifted firmly toward repairing the balance sheet.
JPMorgan Chase & Co. called the deal “the first material act” of de Meo’s tenure and “a sharp change in strategy,” hinting at the possibility of further divestitures of lower-margin assets. While streamlining operations could be welcomed by investors, the bank warned that relinquishing long-term control of beauty may limit upside potential if Gucci fragrances outperform over time.
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