Updated 1:32 p.m. ET Oct. 20
PARIS — Analysts smiled broadly on news that broke overnight of the sale of Kering Beauty to L’Oréal for 4 billion euros.
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As previously reported, Kering and L’Oréal jointly said they are forming a long-term strategic partnership in beauty and wellness.
The binding agreement encompasses the acquisition of the House of Creed by L’Oréal and gives the French beauty giant the rights to enter into a 50-year exclusive license for the creation, development and distribution of fragrance and beauty products for Gucci, starting after the expiration in 2028 of Kering’s current license with Coty Inc. for that business.
The partnership will also include a 50-year exclusive license for Bottega Veneta and Balenciaga, which will start at the close of the transaction, which is expected to take place in the first half of 2026.
“Overall, this is a defining deal for L’Oréal — their biggest ever — to strengthen its leading position in global fragrances and in niche — beyond its minority stake in Amouage,” wrote Céline Pannuti, head of European staples and beverage research at J.P. Morgan, in a note.
On Monday, L’Oréal stock closed up 1.2 percent to 395.35 euros, while Kering stock advanced 4.8 percent to 324.50 euros.
News of the deal took some off guard.
“We are surprised by such a U-turn in the group’s in-house beauty strategy, which was aimed at replicating the successful path of Kering eyewear, internalized a decade ago,” wrote Thomas Chauvet, an analyst at Citi.
As previously reported by WWD, industry sources indicated that Kering is looking to shed its eyewear business too.
“That said, we appreciate L’Oréal’s firepower in growing beauty licenses [e.g. YSL successfully licensed by Kering since 2008], particularly Gucci’s long-term potential as a ‘blockbuster’ fragrance brand,” Chauvet continued.
Citi estimates the transaction will reduce Kering’s FY26E EBIT and EPS by a high-single-digit and midsingle-digit percentage, respectively, and financial leverage to about 1.5 times net debt and EBITDA from about 2.5 times. (At June 30, Kering net debt amounted to 9.5 billion euros.)
“The latter is a positive considering the group’s elevated financial leverage has been a cause for concern over the past year,” Chauvet wrote.
Barclays estimated that Creed represents the majority — about 93 percent — of Kering Beauty’s sales.
“From a strategic perspective, the reported deal would give L’Oréal a stronger foothold in the luxury segment and cross-brand ties between high-end fashion and beauty, and does help secure strong innovation, which should help drive incremental growth,” wrote Carole Madjo, an analyst at Barclays, in a note.
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