French luxury group Kering, owner of Gucci and Bottega Veneta, has agreed to sell its beauty division to L’Oréal for €4 billion ($4.66 billion). The move, led by new CEO Luca de Meo, marks a major step in reducing the group’s mounting debt and refocusing on its core fashion business.
What the Deal Includes
Under the agreement, L’Oréal will acquire Creed, Kering’s high-end fragrance brand, as well as long-term exclusive licenses to produce and develop perfumes and beauty products for Gucci, Bottega Veneta, and Balenciaga.
The 50-year licensing deal will begin after Coty’s current Gucci fragrance contract expires, which analysts expect to happen in 2028. Once active, the partnership will make L’Oréal the exclusive global producer of beauty products under Kering’s fashion houses.
Debt Reduction and Refocusing
The sale is a critical move for Kering, whose net debt stood at €9.5 billion as of June 2025, in addition to €6 billion in long-term lease liabilities. The company has been under pressure to improve its balance sheet after weak performance at Gucci, its main profit driver, which has suffered from slower growth in China.
“This sale may be bitter but necessary medicine,” analysts at Bernstein commented, noting that the divestment restores financial flexibility and stability.
Analysts at RBC said that returning to a beauty-licensing model would make Kering “less capital-intensive and potentially higher margin,” freeing up resources to reinvest in its core luxury fashion business.
Reversing Pinault’s Expansion Strategy
The move represents a reversal of one of the most ambitious strategies of Kering’s previous CEO, François-Henri Pinault, whose family still controls the group. Kering entered the beauty market in 2023 by buying Creed for €3.5 billion, hoping to diversify beyond Gucci. However, the division has struggled, posting a €60 million operating loss in the first half of 2025.
De Meo, who became CEO in September, has signaled a sharper focus: restructuring, debt reduction, and a pause on non-core projects — including the planned full acquisition of Valentino and the sale of several real estate stakes to generate cash.
L’Oreal’s Biggest Deal to Date
For L’Oréal, the acquisition is its largest ever, surpassing its $2.5 billion purchase of Aesop in 2023. The deal also strengthens its luxury division, which already includes best-selling Yves Saint Laurent perfumes — a brand it acquired from Kering in 2008.
The two companies also announced plans to create a joint venture focused on “luxury experiences and services” for high-end clients, further aligning their strategies in the luxury market.
Industry Reactions
“L’Oréal has strong momentum in its Luxe division and stands to benefit from Kering’s underdeveloped yet prestigious fragrance lines,” said Bruno-Roland Bernard of the Institut Français de la Mode.
He added that L’Oréal may have secured favorable terms thanks to Kering’s urgency to cut debt: “Few players have both the expertise and financial strength to negotiate at this level.”
The transaction is expected to close in the first half of 2026, pending regulatory approval.
