Kering nears sale of beauty unit to L’Oréal, according to Wall Street Journal

French luxury group Kering, which has been struggling for years, is reportedly close to selling its beauty division — valued at US$4 billion — to fellow cosmetics giant L’Oréal, the world’s, according to The Wall Street Journal.

Contacted by AFP, Kering declined to comment, while L’Oréal has not yet responded.

The American financial daily reports that the deal could be announced as soon as next week, provided talks don’t fall through or a rival bidder doesn’t appear.

The news comes just one month after Kering’s new CEO, 58-year-old Luca de Meo, took office. He is tasked with turning around the group, which has been battered for several years by the difficulties of its flagship brand, Gucci.

“The current situation (…)strengthens our determination to act without delay,” Luca de Meo declared on the day of his appointment, September 9. “This will require clear and decisive choices,” he warned. “We must continue to reduce our debt, reduce our costs. And where necessary, rationalize, reorganize, reposition some of our brands,” de Meo said.

The Creed jewel

The sale of the beauty division — established in 2023 to diversify revenues and including the Creed perfume brand acquired the same year for EUR 3.5 billion – would mark a major move for the new CEO.

Kering Beauté was intended to accelerate the development of brands such as Bottega Veneta, Balenciaga, Alexander McQueen, Pomellato, and Qeelin in the cosmetics sector. The group has also invested in the niche fragrance label Matières Premières.

However, the perfumes and cosmetics of Kering’s two main fashion houses remain licensed to other companies.

The license for Yves Saint Laurent perfumes and cosmetics has been held by L’Oréal for several years and for a “very, very, very long time,” the group’s CEO, Nicolas Hieronimus, told AFP in February 2023. Gucci’s fragrance and cosmetics license is held by the American company Coty and is expected to expire in the coming years.

“We suspect that all options are being considered, since, aside from Creed — which is highly profitable — the other assets, including Bottega Veneta, Balenciaga, and other fragrances, currently account for only marginal contributions,” HSBC analysts wrote in a mid-September note. They added that Kering could “either extend its collaboration with Coty or choose a more dynamic partner for its flagship brand, Gucci.”

Reducing debt

A full sale of the beauty division could help Kering bring down its debt, which stood at EUR 9.5 billion in July.

The group, burdened by challenges at its Gucci brand and a global luxury market slowdown, continues to struggle. In July, it reported a 46% drop in first-half net profit to EUR 474 million, along with a 16% decline in revenue to EUR 7.6 billion.