Luxury giant Kering is making a move by acquiring a 30 percent stake, in Valentino, the renowned Italian luxury fashion brand. In a deal of 1.7 billion euros with the possibility of complete ownership down the line Kering is determined to bolster its fashion business in light of concerns, about Gucci’s performance.
Kering, the renowned luxury powerhouse, has made a daring move, announcing its intention to acquire a substantial 30 percent stake in the prestigious Italian luxury fashion house, Valentino. This significant deal comes at a crucial time when Kering’s owned brand, Gucci, is grappling with performance issues.
Valued at a staggering 1.7 billion euros, this strategic purchase marks a significant step forward in Kering’s fashion business. The announcement coincides with the release of Kering’s Q2 financial results, adding even more excitement to the news.
As part of this landmark agreement, Kering secures the enticing option to potentially gain full ownership of Valentino, with the right to acquire 100 percent of the fashion house’s share capital by the year 2028. Notably, there are hints that Qatar’s Mayhoola, the current owner of Valentino, might also invest in Kering, indicating a broader collaboration between the two luxury entities.
This acquisition of Valentino and the possibility of further collaboration between Mayhoola and Kering demonstrate a strategic move by both companies to strengthen their positions in the fiercely competitive luxury fashion market. However, Kering’s announcement to acquire a 30 percent share in Valentino has raised concerns among investors due to Gucci’s ongoing underperformance.
Gucci’s second-quarter sales rose by a mere 1 percent on a comparable basis, falling significantly short of the 4.2 percent growth that analysts had anticipated. Responding to this underperformance, Kering, which derives two-thirds of its profit from Gucci, is taking action to revive the brand’s appeal. Just last week, Gucci’s CEO, Marco Bizzarri, announced his impending exit, and Jean-Francois Palus, a trusted lieutenant of Kering’s CEO Pinault, will temporarily fill the position. The search for a permanent Gucci CEO will commence in September.
In stark contrast to Kering’s situation, other luxury companies, including its larger rival LVMH, have experienced double-digit growth. LVMH recently reported a remarkable 21 percent increase in sales of its fashion and leather goods division, which includes renowned brands like Dior and Louis Vuitton. This discrepancy in growth rates underscores the challenges Kering faces in the luxury market and emphasizes the need for strategic measures to regain momentum and competitiveness.
