What's the next move for Kering Group in partnership with L'Oréal?
Today, as the global economy faces significant changes, even the top luxury brands are encountering increasing challenges. In this context, it is a wise choice to weather the storm by joining forces and forming strong alliances. On one hand, this approach can alleviate financial pressures; on the other hand, it can address issues in brand development. Against this backdrop, Kering Group plans to sell its beauty business for €4 billion.
On October 20, beauty giant L'Oréal Group and luxury giant Kering Group jointly announced a long-term strategic partnership in the luxury beauty sector. Kering will sell its beauty business to L'Oréal for €4 billion (approximately ¥33.3 billion), with L'Oréal also paying Kering an annual brand licensing fee. The transaction is expected to be completed in the first half of 2026.
Under the agreement, L'Oréal will acquire a 50-year license for Kering's Creed brand and other luxury brands such as Bottega Veneta and Balenciaga. Meanwhile, Gucci Beauty's licensing agreement with Coty remains in effect and is set to expire in 2028. Beyond beauty, the two companies also plan to explore collaboration opportunities in luxury, health, and longevity through a 50-50 joint venture.
According to Kering's financial reports, the beauty division's total sales reached €323 million in 2024, a 421% year-on-year increase, primarily driven by Creed. In the first half of 2025, the beauty business maintained a 9% growth rate. However, Kering's overall sales fell 16% year-on-year, with net profit dropping 46%. The group also faces high debt pressure, with net debt reaching €9.5 billion and long-term lease liabilities of €6 billion as of June.
So, what considerations led Kering to sell its beauty business to L'Oréal for €4 billion? Can this strategic partnership help Kering address its current challenges?
Partnering with L'Oréal: Kering's Right Choice
L'Oréal is often described as a "beauty empire," largely due to its portfolio of well-known brands like L'Oréal Paris, Maybelline New York, Yves Saint Laurent Beauty, and Lancôme. By selling its beauty business to L'Oréal, Kering is essentially placing its brands into L'Oréal's "treasure chest" of beauty.
As a leading beauty brand, L'Oréal has the resources to help Kering's beauty brands forge a path of strong collaboration. From this perspective, Kering's decision to sell is undoubtedly the right move. Specifically:
First, the sale will ease Kering's significant debt burden, providing a substantial cash flow to sustain current operations.
Second, by offloading its beauty brands—especially the highly profitable Creed—to L'Oréal, Kering can ensure its brands benefit from L'Oréal's strength, further solidifying their position in the beauty market.
Additionally, L'Oréal has a track record of scaling up Kering's beauty brands. In 2008, it acquired Yves Saint Laurent Beauty for €1.7 billion, and through L'Oréal's support, the brand has become a heavyweight in the beauty industry.
Thus, partnering with L'Oréal is a strategic move for Kering—not only addressing immediate challenges but also laying the groundwork for future growth.
Partnering with L'Oréal: Kering's Lightweight Restart
Across industries, including beauty, companies are focusing on core operations and streamlining strategies. Viewed from this angle, Kering's sale of its beauty business to L'Oréal reflects a deeper shift toward prioritizing core value and business, enabling a "lightweight" restart.
Public data shows Kering's overall business is under increasing pressure. While beauty sales grew 9%, this growth is negligible compared to the challenges faced by its flagship brands. In H1 2025, group revenue and profit both saw double-digit declines, exceeding market expectations. As of June 30, 2025, Kering's debt stood at €9.5 billion.
At this juncture, selling attractive assets to address high debt is a critical consideration for Kering. It is against this backdrop that Kering has once again partnered with L'Oréal.
This sale, Kering can prioritize monetizing high-quality assets while optimizing and consolidating its operations. In this sense, the partnership with L'Oréal allows Kering to "travel light," focusing its attention on core businesses like apparel, accessories, and retail.
Conclusion
Following the success of Yves Saint Laurent Beauty, 2025 marks another partnership between L'Oréal and Kering. Amid ongoing industry shifts, selling its beauty business is undoubtedly a wise decision for Kering.
Leveraging L'Oréal's dominance in beauty, Kering's beauty brands will gain deep support, ensuring sustainable growth. More importantly, the sale alleviates Kering's debt and operational pressures, allowing it to refocus on core businesses.
Partnering with L'Oréal, Kering is undergoing a strategic reorganization and brand revival. As collaboration deepens, we can expect another success story akin to Yves Saint Laurent Beauty.
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