The move came as major brands such as Gucci and Balenciaga suffered a setback in their performance.
According to a Reuters report on the 19th, Kering decided to sell its beauty division to L’Oreal for about 4 billion euros. The deal will help L’Oreal acquire Creed, a perfume maker owned by Kering. It will also have the right to develop beauty products under the brands Bottega Veneta and Balenciaga. It will be subject to a 50-year exclusive license.
The sale of Kering’s beauty business is a move aimed at reducing net debt, Reuters said. Kering launched a new beauty division in 2023 to grow the cosmetics and perfume market, but criticism has been raised that Gucci, the largest brand by sales, is struggling with sluggish sales in China and that its new business is colliding with other existing business segments.
Kering’s net debt stood at 9.5 billion euros as of the end of June, according to Reuters. Kering posted a 46% year-on-year plunge in net profit in the first half of this year to 474 million euros in its earnings report in July. Gucci has been hit by falling demand in its core market, China, Reuters said.
The sale of the beauty business is the first strategic move by new CEO Luca de Meo, who officially took office last month, Bloomberg pointed out. Kering has struggled in competition with European fashion giants such as LVMH and Hermes, and has begun full-scale innovation, including the drastic selection of Meo, who led French carmaker Renault as its new CEO in June.
“We will work with global leaders in the beauty sector to accelerate the development of perfumes and cosmetics for major brands, enabling them to expand their scale and realize their long-term potential in the sector,” CEO Meo said in a statement, Bloomberg said.
Kering recently suffered from a negative situation in which he was fined about 190 billion won by the European Commission for violating antitrust. He is accused of abusing his power by restricting recommended prices, maximum discount rates, and sales periods against online and offline retailers. In addition, he was humiliated by falling behind Japanese SPA brand Uniqlo in recent performance comparisons. Uniqlo’s parent company, Fast Retailing, achieved sales of 3.4 trillion yen from September last year to August, surpassing Kering’s sales last year.
SALLY LEE
US ASIA JOURNAL
