Kering: Doubled by Estée Lauder, Kering misses a possibility to purchase Tom Ford

(BFM Bourse) – Another failure for Kering. The number two French luxury brand failed to get its hands on Tom Ford. Ultimately, the cosmetics giant Estée Lauder won. A missed opportunity for Kering to reduce its dependence on Gucci.

Kering will ultimately not be the proud owner of Tom Ford. After all, it was Estée Lauder who swept his nose and beard at François-Henri Pinault’s group. The American cosmetics giant announces the acquisition of Tom Ford based on an enterprise value of 2.8 billion dollars.

However, ten days have passed since the owner of Gucci was approached to acquire the brand from the famous designer Tom Ford, who then reported Wall Street Journalciting sources familiar with the matter.

The cosmetics specialist therefore had the preference of Tom Ford. The designer said in a statement that Estée Lauder is “the perfect home” for his eponymous label, founded in 2005.

“Another Missed Chance”

“Another missed opportunity for Kering” underlines TP Icap Midcap in its latest note dedicated to the French luxury specialist. The design studio recalls that after Exor’s recent investments in Louboutin or Shang Xia, it has taken on Ferrari, or that of Capri Holding (Versace, Jimmy Choo, Michael Kors) or Tapestry (Coach, Kate Spade & Stuart Weizman).

TP Icap Midcap then envisages a merger between Richemont and Kering, two companies which, according to the design agency, “could complement each other advantageously”. “The combination would create significant economies of scale and close the gap with LVMH,” adds TP Icap Midcap.

Gucci addiction

The acquisition of Tom Ford then presented Kering with a tremendous opportunity to strengthen its brand portfolio in its core business of fashion and leather goods at a time when Gucci is losing momentum. Invest Securities recalled in a note that Kering’s acquisition of Tom Ford would even be necessary to compensate for the loss of momentum of its emblematic Gucci brand, “which is struggling to restart against direct competitors that everyone smiles at but nothing about says that in the end they will not experience a reversal of fate themselves.”

“Not only does Kering need to maintain Gucci’s success while reducing its dependence on the House of Gucci by diversifying its mix through key internal and external developments to justify a discount reduction,” recalls TP Icap Midcap.

“The 25 percent discount in enterprise value to peers is explained by a lack of near-term momentum relative to peers, over-reliance on Gucci (55% of sales and 74% of current operating profit), polarization towards soft luxury, and underexposure to Companies fueled North America (27% of sales in 2021) and the uncertainties surrounding China (30% of sales), of which half of Gucci’s sales are made in Asia Pacific,” the design office continues.

In response to this missed opportunity, Kering shares fell 2.1% to €535.7 around 3:50 p.m.

Sabrina Sadgui – ©2022 BFM Stock Exchange

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