Julius Young — Founder & Editor-in-Chief, Vantage
Kering sold its beauty division to L'Oreal for 4 billion euros, two years after building it in-house and buying House of Creed for 3.5 billion. The reversal signals the acquisition-led conglomerate model is unwinding.
In March, L'Oreal finalized a 4 billion euro acquisition of Kering Beaute, the in-house beauty division Kering had spent two years building. The deal handed L'Oreal the House of Creed fragrance brand outright, along with 50-year exclusive licenses to develop beauty and fragrance products for Bottega Veneta and Balenciaga, with a matching Gucci license to follow once Kering's existing arrangement with Coty expires in 2028. It is L'Oreal's largest acquisition in company history.
The reversal is the notable part. Kering built its beauty division specifically to capture more profit in-house, backing the strategy by paying 3.5 billion euros for Creed. Two years later, facing roughly 9.5 billion euros in net debt and a first-half report showing a 46 percent drop in net profit, the company under new CEO Luca de Meo sold the entire operation, including the asset it had just spent billions acquiring.
This is not an isolated move. LVMH has been reported to be weighing sales of its own beauty assets, and Puig's merger talks with Byredo's parent company collapsed earlier this year rather than take on combined valuation risk. Across the industry, acquisition-led growth built up debt faster than it built up profit, and the current generation of luxury executives is now paying down that debt by selling the assets their predecessors spent to acquire. Related: Why Hermes Has a 41% Operating Margin