As part of the agreement, Kering has secured an option to potentially acquire the entire share capital of Valentino to Bolster Struggling Gucci Brand by the year 2028. French luxury conglomerate Kering has made a significant move to enhance its position in the fashion industry by purchasing a 30% stake in the renowned Italian fashion label, Valentino. The deal, valued at a staggering 1.7 billion euros ($1.87 billion) in cash, involves Kering buying the stake from Qatari investment fund Mayhoola.
A Broader Strategic Collaboration
In a statement, Kering revealed that the acquisition is part of a broader strategic partnership with Mayhoola. This partnership also opens the possibility of Mayhoola becoming a shareholder in Kering, marking a significant step forward in the luxury group’s expansion plans.
The move comes amidst Kering’s ongoing efforts to revitalize the sales of its flagship brand, Gucci. The French luxury group recently faced a setback when its second-quarter sales missed market forecasts, showing meager growth of just 3%. While the overall sales for the quarter reached 4.96 billion euros ($5.45 billion) at constant rates, it fell below analysts’ expectations of a 6% increase. Gucci, in particular, struggled to keep pace with its rivals, recording only a modest 1% sales growth during the same period.
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Growing Luxury Companies
Meanwhile, other luxury companies, like the larger rival LVMH, reported double-digit growth. LVMH, home to renowned brands like Dior and Louis Vuitton, saw a remarkable 21% rise in sales for its fashion and leather goods division.
The challenging North American market further added to Kering’s woes, with the company’s retail revenue in the region plunging by 23% in the second quarter. Jean-Marc Duplaix, the chief financial officer of Kering, acknowledged that North America remains “a more complicated market for luxury.”
Disappointment of Kering CEO
In response to the lackluster results, Kering’s CEO, Francois-Henri Pinault, expressed his disappointment, stating that the numbers fell short of their ambitions and the brand’s potential, especially for Gucci. To address the situation, Kering announced a major management reshuffle, which includes the departure of the veteran Gucci CEO, Marco Bizzarri. The luxury group hopes that the restructuring will breathe new life into the struggling brand and drive sales growth.
With the acquisition of the 30% stake in Valentino, Kering aims to strengthen its portfolio and expand its influence in the luxury fashion landscape. Valentino, renowned for its high-end creations, currently operates 211 directly operated stores and achieved a revenue of 1.4 billion euros in 2022. The completion of the stake purchase is expected before the end of the year, signaling a strategic move by Kering to reinforce its foothold in the competitive luxury market. As Kering gains board representation at Valentino, the company is poised to work closely with the Italian label to maximize its growth potential and complement the endeavors to reinvigorate Gucci’s performance.
