The move marks a significant milestone for newly appointed CEO Luca de Meo, signaling a renewed emphasis on Kering’s core fashion business while working to reduce its growing debt.

The landmark deal — L’Oréal’s largest acquisition to date — will see the world’s leading cosmetics maker acquire Creed, Kering’s flagship fragrance brand, along with long-term exclusive licenses to develop beauty and fragrance products for Gucci, Bottega Veneta, and Balenciaga.

The 50-year licensing arrangement will take effect once existing contracts, such as Gucci’s current deal with Coty expiring in 2028, conclude.

A Strategic Refocus for Kering

The divestment follows a challenging period for Kering, which had ventured into the beauty sector in 2023 through its €3.5 billion purchase of Creed.

The group’s beauty arm, Kering Beauté, had been created to diversify revenue streams and reduce reliance on Gucci, which continues to account for a major share of profits. However, the division reported a €60 million operating loss in the first half of 2025.

By offloading its beauty unit at a valuation close to its initial investment, Kering is now focusing on financial discipline and stabilizing growth.

The company’s net debt stood at €9.5 billion at the end of June, with an additional €6 billion in lease obligations — figures that prompted analysts to call for decisive action.

“This transaction reflects a pragmatic approach by Kering’s management,” said analysts at Bernstein. “While it may be difficult to part with an ambitious venture, it is a necessary step to restore balance and protect long-term shareholder value.”

Since taking the helm in September, Luca de Meo has emphasized the importance of “hard choices” to strengthen Kering’s financial foundation.

The sale of Kering Beauté represents the first major move under his leadership, complementing ongoing measures such as the postponement of the Valentino acquisition and plans to sell stakes in real estate assets.

De Meo’s approach underscores a return to Kering’s core expertise in soft luxury — fashion, leather goods, and accessories — sectors where the group has historically excelled.

Analysts at RBC described the transition back to a licensing model as “less capital intensive, more stable, and potentially higher margin,” aligning with industry trends and investor expectations.

A Power Move for L’Oréal

For L’Oréal, the acquisition consolidates its dominance in the high-end beauty market. The deal gives the company access to a portfolio of prestigious luxury brands, expanding its reach beyond existing partnerships such as Yves Saint Laurent Beauté, which it acquired from Kering in 2008.

“L’Oréal’s Luxe division is thriving, and the addition of these brands represents a natural evolution,” said Bruno-Roland Bernard, a Paris-based consultant and professor at Institut Français de la Mode.

“With limited competition for assets of this scale, L’Oréal has seized an ideal opportunity to strengthen its leadership.”

The acquisition is expected to close in the first half of 2026, pending regulatory approvals. Industry observers see it as a calculated step for both sides: Kering gains breathing room to refocus on fashion excellence, while L’Oréal deepens its footprint in luxury fragrance and cosmetics.

A Win-Win Transaction

The transaction not only streamlines Kering’s balance sheet but also reinforces cooperation between two of France’s most iconic global companies. The two groups are also establishing a joint venture to develop premium services and experiences for luxury clients — signaling continued collaboration beyond the sale.

As De Meo steers Kering into a new era of strategic focus, the sale of Kering Beauté stands out as a move that balances financial prudence with long-term ambition.

Meanwhile, L’Oréal’s bold expansion further cements its position as the world’s beauty leader, setting the stage for a new chapter in Europe’s luxury landscape.

The company confirmed earlier this week that it has launched a strategic review of its Consumer Beauty business. The review could lead to a spinoff, sale, or restructuring of certain brands, with the goal of reducing debt, increasing financial flexibility, and allowing greater focus on the group’s high-growth fragrance portfolio.

Industry experts view the move as a chance for Coty to sharpen its focus and unlock value. “This is about repositioning Coty to compete more effectively in the future,” said Michael Ashley Schulman, partner at Running Point Capital Advisors. “Coty has strong brands, but this shift can give them the agility and resources they need to thrive in a fast-changing beauty industry.”

While Coty’s Consumer Beauty sales slipped in the past year, the division retains a loyal customer base and global retail presence. Analysts say potential buyers – including private equity firms – are watching closely, as the portfolio represents an attractive entry point into mass-market cosmetics with global scale. In fact, past deals in the sector have drawn major valuations, such as retailer Elf Beauty’s acquisition of Rhode and L’Oreal’s purchase of Medik8.

Buyout firms could also show interest, echoing Coty’s earlier deal with KKR in 2020, when the private equity firm invested in its Wella haircare business. “The likelihood is for piecemeal deals, which could maximize value for shareholders,” Schulman noted, pointing to names like Permira and L Catterton as potential bidders.

Even as Coty evaluates its Consumer Beauty unit, the company’s fragrance business is flourishing. The combined fragrance division now accounts for nearly 70% of sales, reflecting strong momentum across categories that are expanding at rates of 2% to 9% annually. With iconic licences including Gucci and Burberry, Coty’s fragrance portfolio continues to resonate with consumers worldwide. Analysts estimate the Gucci fragrance licence alone generates nearly $500 million in annual revenue, underscoring the division’s strength and stability.

The broader fragrance industry is also experiencing a wave of innovation, with global players like L’Oreal, Estee Lauder, and Puig investing in niche and experiential brands. Coty’s decision to prioritize fragrances positions it well to capture this demand. “Fragrance is where we see Coty differentiating itself, and it is an area of real consumer excitement,” said Alfonso Emanuele de Leon, a partner at FA Hong Kong Consultancy.

By potentially streamlining its portfolio, Coty could also free up resources to invest in technology, marketing, and faster product innovation. Industry analysts have noted that agility and speed are key advantages in today’s beauty market, particularly as digital platforms and influencers shape consumer preferences. Coty’s established presence provides a strong base to accelerate in these areas once it reallocates capital and focus.

Despite challenges, Coty has consistently demonstrated resilience and adaptability since its $12.5 billion acquisition of Procter & Gamble’s beauty brands in 2015. The company has successfully divested businesses when needed, while building its fragrance powerhouse into one of the strongest in the world. Analysts say the current review signals Coty’s commitment to long-term growth rather than short-term fixes.

“This is about making Coty future-ready,” said Dan Su, a Morningstar analyst. “Yes, the Consumer Beauty segment has hurdles, but the brand recognition and scale are valuable. With the right structure, Coty can turn this into an opportunity to create shareholder and consumer value.”

As Coty prepares its next steps, the beauty giant remains well-positioned within the global industry. The strategic review not only underscores its willingness to adapt but also highlights the group’s broader ambition: to balance heritage with innovation, and to ensure its portfolio reflects the evolving expectations of beauty consumers worldwide.