Kering's Beauty Sale to L'Oreal: A Strategic Debt Reduction Move

Kering has agreed to sell its beauty business to L'Oreal for €4 billion. This move marks the first major decision by CEO Luca de Meo to reduce Kering's debt and shift strategic focus. The sale includes the Creed fragrance line and licenses for Kering's brands, like Gucci and Balenciaga.

In a strategic move to reduce debt, Gucci's owner Kering has agreed to sell its beauty business to L'Oreal for 4 billion euros. This significant decision marks the first major step by new CEO Luca de Meo as he works to reshape the luxury group. The deal will see L'Oreal acquiring the Creed fragrance line, along with 50-year rights to develop products under Kering's fashion labels, including Bottega Veneta and Balenciaga.

The decision comes just two months after de Meo took over, as he seeks to reverse his predecessor's strategic expansions. L'Oreal's purchase is seen as wise by analysts, given the high debt levels Kering faces. Shares in both companies rose following the announcement. De Meo hinted at more deals on the horizon, aiming to focus on Kering's core strengths while considering divestments, such as the eyewear division, to further reduce the debt burden.

This sale allows Kering to address its significant debt, which had reached 9.5 billion euros by June. The company has struggled with weak performance in its beauty division and declining growth in key markets for Gucci. By selling its beauty business, Kering takes a significant step towards financial stability, freeing resources to focus on its most promising divisions.

(With inputs from agencies.)