Gucci owner Kering (PPRUF) has agreed to sell its beauty business to L’Oreal (LRLCF) for $4.7 billion U.S.
The sale of the beauty unit represents a major shift in strategy by new Kering CEO Luca de Meo as he moves to tackle the luxury group’s high debt levels and focus on its fashion business.
Under the deal, French beauty giant L’Oreal will acquire Kering’s fragrance line Creed as well as exclusive rights to develop fragrance and beauty products for 50 years under Kering’s fashion labels including Bottega Veneta and Balenciaga.
Kering beauty will be L’Oreal’s largest acquisition ever, bigger than its purchase of Australian brand Aesop for $2.5 billion U.S. in 2023.
The deal makes sense strategically, say analysts, with Creed one of the most exciting brands in the growing luxury fragrance sector.
The sale is also a significant step towards reducing Kering’s debt, which stood at 9.5 billion euros ($11 billion U.S.) at the end of June this year.
Kering set up its beauty business in 2023 after acquiring perfume maker Creed to cut its reliance on the bestselling Gucci brand, which accounts for most of its profits.
But Kering has struggled to increase its beauty business. The division that comprises beauty operations reported a hefty operating loss for the first half of this year.
Kering is also battling declining growth at its largest brand Gucci as demand in the key Chinese market slows amid a softening economy.
Gucci’s revenue plummeted 25% year-over-year in this year’s second quarter, increasing pressure on Kering to deleverage to avoid further credit downgrades.
L’Oreal, the maker of Maybelline make-up and CeraVe skincare, already produces blockbuster perfumes under the Yves Saint Laurent label.
Fragrances, which account for about 14% of L’Oreal’s 2024 revenues, are growing in double-digit figures, outperforming the segment overall.
Kering’s stock has risen 35% this year to trade at Euros 320.30 per share. L’Oreal’s share price has gained 16% in 2025 to trade at Euros 391.70.
