Kering, the parent company of Gucci, has agreed to sell its beauty division to L’Oreal for €4 billion (US$4.66 billion). The move is a key strategic decision by new CEO Luca de Meo, aimed at reducing Kering’s high debt and refocusing on its core fashion business.
Under the deal, L’Oreal will acquire Creed, the fragrance brand Kering purchased in 2023, and gain exclusive, 50-year rights to develop fragrance and beauty products for Kering’s fashion labels, including Bottega Veneta and Balenciaga. The agreement also grants L’Oreal the Gucci license for 50 years, effective after the expiration of Gucci’s current contract with Coty, which is expected to last until 2028.
The transaction marks L’Oreal’s largest acquisition to date, surpassing its 2023 purchase of Australian brand Aesop. Analysts at Bernstein called it “bitter but necessary medicine” for Kering, noting Creed’s significance in the growing luxury fragrance sector. Following the announcement, Kering shares rose 4.7%, while L’Oreal shares gained 1.4%.
The sale helps reduce Kering’s net debt, which stood at €9.5 billion at the end of June, plus €6 billion in long-term lease liabilities, levels that had raised investor concerns.
Since taking over in September, CEO De Meo has accelerated discussions with L’Oreal. The sale unwinds one of the major strategic moves by his predecessor, Francois-Henri Pinault, who launched Kering’s beauty division with the Creed acquisition in 2023 to diversify beyond Gucci.
Kering struggled to scale the division, which posted a €60 million operating loss in 1H25. Gucci’s growth has also slowed, with revenue falling 25% year-on-year in the last reported quarter, intensifying pressure to deleverage. De Meo has signaled a willingness to make “difficult decisions” to reduce debt, including postponing plans to fully acquire Valentino and selling stakes in real estate.
L’Oreal, maker of Maybelline and CeraVe, already manages Yves Saint Laurent fragrances, acquired from Kering in 2008. The companies are also launching a joint venture to provide luxury client experiences and services.
Fragrances are a strong segment for L’Oreal, accounting for around 14% of 2024 revenues and outperforming other segments with double-digit growth in Q2. Consultant Bruno-Roland Bernard noted that L’Oreal benefits from acquiring licenses for Kering’s “prestigious yet relatively underdeveloped brands,” highlighting L’Oreal’s favorable bargaining position.
The deal is expected to close in 1H26. Kering was advised by Evercore and Centerview, and L’Oreal by Bank of America and Rothschild.
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