A potential sale of its beauty unit, including luxury cologne brand Creed, could help Kering reduce debt and refocus on fashion—while offering L’Oréal a fresh boost in high-end cosmetics.
Kering Considers Selling Beauty Arm to L’Oréal
Kering SA (PPRUY) is in advanced talks to sell its beauty division to L’Oréal SA (LRLCY) in a deal valued at approximately $4 billion, according to The Wall Street Journal.
- The announcement could come as early as next week—barring last-minute bidders or negotiation hurdles.
- This move comes shortly after Luca de Meo took the reins as Kering’s new CEO, signaling a strategic reset just months into his tenure.
Kering’s beauty division, launched in 2023, was intended to bring more perfume and cosmetics production in-house, but faced limited traction.
- The group had also acquired Creed, a high-end cologne label, via an all-cash deal that year.
- However, slowing Gucci sales in China and a soft U.S. market for Saint Laurent have pressured revenues—prompting Kering to explore non-core asset sales.
A Strategic Shift: Cutting Debt, Refocusing on Fashion
Kering’s potential beauty exit reflects a broader shift back to core competencies:
- With €11 billion in debt as of June 30, selling the beauty arm could improve liquidity and reduce financial strain.
- De Meo, previously CEO of Renault and a brand revitalization expert from Fiat and Seat, appears to be prioritizing Kering’s flagship fashion houses over building new verticals.
The beauty division’s short lifespan underscores the urgency for Kering to streamline operations amid weakening luxury demand globally.
Meanwhile, Kering stock rose slightly on the news, closing at €309.55, although the average analyst price target of €245.00 suggests a potential 20.85% downside, reflecting continued investor caution.
L’Oréal’s Play: Luxury Expansion Through Creed and Fashion Ties
For L’Oréal, the deal represents a chance to further cement its dominance in the luxury beauty segment.
- Acquiring Creed adds a well-known prestige fragrance to its roster, joining other powerhouses like Lancôme, Yves Saint Laurent Beauty, and Giorgio Armani Beauty.
- More importantly, the deal could give L’Oréal a path to co-develop beauty products with Kering’s fashion labels such as Alexander McQueen and Bottega Veneta.
L’Oréal has a strong history of brand expansion through acquisitions and partnerships, and this move aligns with its strategy to grow market share in premium beauty categories.
Why This Matters: Both Companies Navigate Shifting Luxury Trends
The proposed sale highlights how both Kering and L’Oréal are adapting to a luxury market grappling with slower global demand:
- Kering seeks to simplify operations, reduce debt, and focus on high-margin fashion brands.
- L’Oréal sees an opportunity to expand its luxury portfolio and tap into the continued appeal of designer fragrances and beauty lines.
If finalized, the sale would mark one of the first major moves under de Meo’s leadership and set the tone for how Kering will prioritize its fashion roots over diversification.
Is Kering Stock a Buy?
Wall Street remains divided on Kering’s outlook:
- The stock holds a Hold consensus rating.
- With an average price target of €245, shares are seen as overvalued, implying a potential 20.85% decline from current levels.
Investors appear wary of soft performance from key brands, even as strategic divestments could eventually strengthen Kering’s balance sheet and long-term focus.
