Core Viewpoint - Kering Group has dramatically shifted its beauty strategy by selling its beauty business to L'Oréal for €4 billion, including the Creed perfume brand and beauty licenses for Gucci, Bottega Veneta, and Balenciaga, signaling a strategic retreat from the beauty sector [2][4][5]. Group 1: Strategic Shift - The decision to sell was driven by new CEO Luca de Meo, who has implemented significant reforms within a short time, contrasting with the previous aggressive expansion into the beauty sector [4][5]. - The agreement includes three key components: L'Oréal acquiring Creed, taking over beauty licenses for Gucci, Bottega Veneta, and Balenciaga, and exploring opportunities in health and longevity together [5][6]. Group 2: Financial Context - Kering faces severe financial pressure, with net debt reaching €9.5 billion and long-term lease liabilities of €6 billion as of June 2025, raising concerns among investors [9]. - Gucci's performance has been declining, with operating profit dropping 52% to €486 million and revenue falling 16% to €7.587 billion in the first half of 2025 [9]. - Despite Kering's beauty segment showing a 9% growth in the same period, it is insufficient to alleviate the overall financial challenges faced by the group [9]. Group 3: Market Implications - The sale reflects a broader trend in the luxury sector, where beauty products are seen as a key growth area, yet Kering's decision indicates a shift towards more strategic and refined decision-making in brand management [11][12]. - The collaboration model between Kering and L'Oréal may set a new trend in the industry, focusing on equity partnerships and joint ventures to maintain brand integrity while leveraging operational expertise from beauty companies [12].

Core Viewpoint - Kering Group has agreed to sell its beauty business to L'Oréal for €4 billion (approximately $4.66 billion) as part of a strategic move by new CEO Luca de Meo to address high debt levels and refocus on core fashion operations [1][2] Group 1: Transaction Details - The agreement allows L'Oréal to acquire Kering's perfume brand Creed and grants a 50-year exclusive license to develop beauty products based on Kering's fashion brands, including Gucci, Balenciaga, and Saint Laurent [1] - The sale is a significant step for Kering to reduce its net debt, which stood at €9.5 billion as of June 30, alongside €6 billion in long-term lease liabilities [1] Group 2: Business Performance - Kering's beauty business, established in 2023, recorded an operating loss of €60 million in the first half of the year, highlighting the challenges faced in diversifying away from Gucci [2] - Gucci's revenue fell by 25% year-on-year in the last fiscal quarter, increasing Kering's pressure to deleverage and avoid further credit rating downgrades [2] Group 3: Strategic Implications - The transaction marks a shift in strategy under CEO de Meo, who took over in September and has committed to rationalizing the business and restructuring if necessary to lower debt levels [2] - L'Oréal's acquisition is its largest to date, surpassing the $2.5 billion purchase of Australian brand Aesop in 2023, indicating L'Oréal's aggressive expansion strategy [2]