Kering Agrees to Sell Beauty Unit to L’Oréal for $4.7 Billion as CEO De Meo Moves to Cut Debt

Gucci’s parent company, Kering (PRTP.PA), said on Sunday it has agreed to sell its beauty division to L’Oréal (OREP.PA) for €4 billion ($4.66 billion) — marking a major strategic shift under new CEO Luca De Meo, who is seeking to reduce the luxury group’s mounting debt and refocus on its core fashion business.

Under the agreement, French beauty giant L’Oréal will acquire Kering’s fragrance brand Creed, along with exclusive 50-year licenses to develop fragrance and beauty lines for Kering’s fashion houses Gucci, Bottega Veneta, and Balenciaga.

Gucci’s fragrance license is currently held by Coty (COTY.N), and analysts expect L’Oréal’s new 50-year licensing deal to begin once Coty’s contract expires, likely in 2028.

The sale represents a significant step toward easing Kering’s debt burden, which stood at €9.5 billion as of June, in addition to €6 billion in long-term lease liabilities — both of which have raised investor concerns.

The move also signals a sharp course correction less than two months into De Meo’s tenure, effectively reversing one of the most ambitious strategic ventures undertaken in recent years by his predecessor, François-Henri Pinault, whose family controls the group.

Kering entered the beauty business in 2023 with the €3.5 billion acquisition of perfume house Creed, in an effort to diversify beyond Gucci, which accounts for the bulk of its profits. But the division has struggled to gain traction, posting an operating loss of €60 million in the first half of this year.

The company has also been grappling with slowing growth at Gucci, hit hard by weakening demand in its key Chinese market. Revenue for the brand fell year-on-year in the last reported quarter, increasing pressure on Kering to deleverage and avoid further credit downgrades.

“We believe selling Kering Beauty at roughly the same price paid for Creed two years ago is a bitter but necessary remedy,” analysts at Bernstein said.

Before the deal was finalized, RBC analysts noted that returning to a beauty licensing model would be “less capital-intensive, less operationally complex, and likely more margin-accretive,” even with a shared revenue arrangement with L’Oréal.

In a note to investors, they added: “This signals a strategic refocus on Kering’s core competencies in soft luxury, while freeing up investment capacity for priority areas.”

Since taking over in September, De Meo has told shareholders that he intends to make tough decisions to reduce debt — including rationalizing and reorganizing parts of the business where necessary. The company has also paused its plans to fully acquire Italian fashion house Valentino, and aims to sell stakes in its real estate holdings to raise additional capital.

L’Oréal, the world’s largest dedicated cosmetics and beauty company, already produces blockbuster perfumes under the Yves Saint Laurent label — rights it acquired from Kering in 2008 for €1.15 billion. Both companies said they will also form a joint venture to develop luxury experiences and services for high-end clients.

The acquisition of Kering Beauty will be L’Oréal’s largest deal to date, surpassing its 2023 purchase of Australian skincare brand Aesop for $2.5 billion. Completion of the transaction is expected in the first half of 2026.

“L’Oréal’s luxury division has strong momentum, and the group will be eager to secure the fragrance and beauty licenses associated with Kering’s prestigious but relatively underdeveloped brands,” said Bruno-Roland Bernard, consultant and adjunct professor of corporate finance and luxury management at the Institut Français de la Mode in Paris.

“They may also be taking advantage of favorable timing — few competitors have the capacity or appetite to negotiate under the time pressure Kering is currently facing,” he added.

L’Oréal has said it is exploring “a number of acquisitions” this year, Reuters reported earlier this month, noting that the company was also named among the preferred potential buyers for a minority stake in Giorgio Armani’s fashion house, according to the late designer’s will.

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