<\/p>\n
A luxury retail giant is accelerating its restructuring efforts by selling its beauty business and ending a decade-long licensing partnership a year ahead of schedule.<\/p>\n
The transaction transfers one of fashion’s biggest beauty brands to a new long-term partner, ending an agreement that wasn’t set to expire for another year. <\/p>\n
It’s a move that also marks another major step in the company’s broader strategy to streamline operations, reduce debt, and strengthen its balance sheet following several years of weakening financial performance.<\/p>\n
Kering ends Gucci partnership a year early<\/p>\n
Kering Group (PPRUY) has announced that Gucci and L’Or\u00e9al (LRLCY) have entered into a 50-year exclusive beauty licensing agreement, expected to begin in mid-2027.<\/p>\n
The new partnership will replace Gucci’s existing beauty license with Coty (COTY), which began in 2016 and had been scheduled to expire on June 30, 2028.<\/p>\n
“By combining Gucci’s global desirability and distinctive creative vision with L’Or\u00e9al’s unparalleled expertise in beauty, innovation capabilities and worldwide distribution network, the partnership aims to unlock significant long-term growth opportunities across fragrance and beauty,” said Kering in a company announcement.<\/p>\n
According to Kering, the partnership is expected to strengthen Gucci’s desirability and brand equity by increasing its global reach across fragrance and beauty.<\/p>\n
“By fully harnessing the complementary strengths of beauty and fashion, Gucci and L’Or\u00e9al aim to deepen consumer engagement, broaden the House’s global reach and reinforce the consistency, relevance and impact of the brand across categories,” the company added.<\/p>\n
L’Or\u00e9al gets a big-name partner<\/p>\n
For L’Or\u00e9al, the agreement expands its portfolio of luxury beauty brands with one of fashion’s most recognizable names while securing long-term rights to develop and market Gucci fragrances and cosmetics.<\/p>\n
Because the agreement begins before Coty’s license expires, Coty will receive approximately $400 million\u00a0in compensation for the early termination.<\/p>\n
The related cash payments are expected to total $250 million during 2026 and up to $150 million in 2027. Selected inventories will also be acquired as part of the transition.<\/p>\n
L’Or\u00e9al will cover transition costs equal to about 70% of the early redemption costs and inventory value, helping facilitate the orderly transfer of the license.<\/p>\n
Why Kering is selling its beauty operations<\/p>\n
The agreement is part of Kering’s broader effort to strengthen its financial position after several years of declining sales and mounting debt, a key investor concern.<\/p>\n
“The proceeds will strengthen the balance sheet and support deleveraging, adding to the 1 billion euro reduction in net debt already achieved in the first half of 2025,” Juliane Barthold and Stoyan Toshev from Frankfurt-based brokerage Metzler told Reuters.<\/p>\n
The analysts added that Kering will continue generating royalty income from its beauty brands through long-term licensing agreements.<\/p>\n
At the end of June 2025, Kering reported net debt of \u20ac9.5 billion (approximately $10.9 billion), along with \u20ac6 billion (about $6.9 billion) in long-term lease liabilities.<\/p>\n
Kering enters a beauty licensing agreement with Gucci and L’Or\u00e9al.<\/p>\n
CFOTO/Future Publishing via Getty Images<\/p>\n
How Kering’s beauty strategy shifted in just three years<\/p>\n
Kering launched Kering Beaut\u00e9 in 2023 after acquiring Creed for \u20ac3.5 billion (approximately $4 billion), aiming to diversify beyond luxury fashion and capitalize on the faster-growing global beauty market.<\/p>\n
On October 19, 2025, the company revealed plans to sell Kering Beaut\u00e9 to L’Or\u00e9al, granting the cosmetics giant a 50-year exclusive license to create, develop, and distribute fragrance and beauty products for brands including Gucci, Bottega Veneta, Balenciaga, and Creed.<\/p>\n
The acquisition closed on March 31, 2026. However, Gucci’s beauty rights remained with Coty under the existing licensing agreement, delaying the transition.<\/p>\n
The newly announced agreement allows that transition to happen roughly one year earlier than originally planned.<\/p>\n
Gucci Beauty operates separately from Gucci’s fashion business and includes fragrances and cosmetics, which were relaunchedin 2019. <\/p>\n
Why Kering built and sold its beauty business<\/p>\n
Kering originally created Kering Beaut\u00e9 to diversify its business as growth in luxury fashion has slowed.<\/p>\n
According to McKinsey & Company’s State of Fashion 2026 Report, the global fashion industry is expected to grow only at a low-single-digit rate in 2026 as macroeconomic uncertainty,\u00a0tariffs,\u00a0and cautious consumer spending continue weighing on demand.<\/p>\n
Beauty, however, has remained one of the strongest-performing consumer categories.<\/p>\n
That resilience made beauty an attractive diversification opportunity for fashion companies even as demand for apparel softened.<\/p>\n
McKinsey & Company’s State of Beauty 2025 Report estimates the global beauty industry was worth approximately $450 billion in 2025 and projects annual growth of about 5% through 2030.<\/p>\n
In the U.S., prestige beauty sales increased 2% to $16 billion during the first half of 2025, while mass-market beauty sales rose 4% to $34.6 billion, according to\u00a0Circana. <\/p>\n
Despite those favorable industry trends, Kering’s overall business continued to weaken, prompting the company to refocus on improving its financial conditions rather than expanding its beauty operations.<\/p>\n
Here’s some of\u00a0my previous coverage\u00a0on beauty retail closures:<\/p>\n
11-year-old cosmetics brand puts business up for sale amid slump12-year-old beauty brand closing nearly all storesTwo beloved beauty brands shut down in 2026Kering continues to face declining sales<\/p>\n
In fiscal 2024, the last year Kering separately reported Kering Beaut\u00e9’s results, company revenue declined 12% year over year, while comparable revenue also fell 12%.<\/p>\n
During the fiscal 2024 earnings call, executives said they intended to build Kering Beaut\u00e9 into a profitable global business by leveraging the strength of the group’s luxury brands.<\/p>\n
The company also launched several new fragrances, which executives said exceeded internal expectations. <\/p>\n
Kering Beaut\u00e9 generated \u20ac323 million (approximately $369.1 million) in revenue during fiscal 2024, driven primarily by Creed’s performance. However, growth slowed in subsequent quarters.<\/p>\n
By full-year 2025, Kering reported a negative \u20ac320 million (around $365.7 million) revenue change for Kering Beaut\u00e9, underscoring the challenges facing the business before its sale.<\/p>\n
Related: IKEA closing key U.S. stores<\/p>\n
#Luxury #retailer #exits #beauty #business #ends #major #partnership<\/p>\n","protected":false},"excerpt":{"rendered":"
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