Kering is offloading its beauty division and ending its Gucci-Coty licensing deal a year ahead of schedule, shifting Gucci’s beauty rights to L'Oréal and signaling a major move to reduce debt and refocus on core luxury brands
Kering, the French luxury conglomerate behind brands like Gucci and Saint Laurent, is accelerating its restructuring by selling its beauty business and ending its Gucci beauty licensing agreement with Coty a year before the original expiration date. The move will transfer one of fashion’s most prominent beauty brands to L'Oréal under a new 50-year exclusive license, beginning in mid-2027. For Kering, this marks a decisive step to streamline operations, reduce debt, and address several years of declining financial performance, according to reporting by TheStreet.
Gucci Beauty Moves to L'Oréal
The new agreement will see L'Oréal take over the global development, production, and distribution of Gucci fragrances and cosmetics, replacing Coty, which has held the license since 2016. Coty was originally set to retain the rights until June 2028, but the early termination will result in Coty receiving approximately $400 million in compensation, with $250 million paid in 2026 and up to $150 million in 2027. L'Oréal will also acquire selected inventories and cover about 70% of the transition costs, ensuring a smooth handover of the business.
For L'Oréal, the deal secures long-term access to one of the most recognizable names in luxury fashion, expanding its already substantial portfolio of high-end beauty brands. The agreement is expected to boost Gucci’s global reach in the beauty sector and deepen consumer engagement across fragrance and cosmetics.
Kering’s Financial Pressures
Kering’s decision to exit the beauty business comes after several years of weakening sales and rising debt. At the end of June 2025, Kering reported net debt of €9.5 billion (about $10.9 billion), along with €6 billion (roughly $6.9 billion) in long-term lease liabilities. The company has already reduced net debt by €1 billion in the first half of 2025, and the proceeds from the beauty business sale are expected to further strengthen its balance sheet and support deleveraging efforts.
Despite the sale, Kering will continue to generate royalty income from its luxury brands through long-term licensing agreements. The company’s broader strategy now focuses on its core fashion houses, aiming to stabilize revenue and restore investor confidence after a period of underperformance.
Shifting Beauty Strategy
Kering only recently entered the beauty market in a significant way, launching Kering Beauté in 2023 after acquiring the fragrance brand Creed for €3.5 billion (about $4 billion). The goal was to diversify beyond luxury apparel and tap into the faster-growing global beauty market. However, as luxury fashion growth slowed and financial pressures mounted, Kering reversed course, announcing in October 2025 that it would sell Kering Beauté to L'Oréal. The transaction, completed in March 2026, included a 50-year exclusive license for L'Oréal to create and distribute beauty products for Gucci, Bottega Veneta, Balenciaga, and Creed.
Gucci Beauty, which operates separately from Gucci’s fashion business, was relaunched in 2019 and has since become a significant player in the prestige beauty segment. The early transfer of Gucci’s beauty license to L'Oréal allows Kering to accelerate its financial restructuring and focus on its most profitable assets.
Industry Context and Market Data
The global beauty industry has shown resilience even as luxury fashion faces headwinds. According to McKinsey & Company, the global beauty market was valued at approximately $450 billion in 2025, with annual growth projected at around 5% through 2030. In the U.S., prestige beauty sales rose 2% to $16 billion in the first half of 2025, while mass-market beauty sales increased 4% to $34.6 billion, based on data from Circana. Despite these favorable trends, Kering Beauté reported €323 million (about $369 million) in revenue for fiscal 2024, but growth slowed in subsequent quarters, and by full-year 2025, the division posted a negative €320 million (about $366 million) revenue change.
Kering’s experience highlights the challenges luxury groups face when expanding into adjacent markets. While beauty remains a growth category, the capital requirements, competitive landscape, and need for global scale can strain even established players. For investors, the shift underscores the importance of balance sheet strength and strategic focus, especially when market conditions turn against core businesses.
Licensing agreements are a common way for luxury brands to monetize their names in categories outside their primary expertise. These deals allow companies to generate steady royalty income without the operational risks of running a separate business line. For Kering, the long-term licensing model offers a way to participate in the growth of beauty while concentrating resources on its flagship fashion houses. For L'Oréal, acquiring exclusive rights to Gucci Beauty strengthens its leadership in the global prestige beauty market and provides a platform for future product innovation and expansion.
