Why Kering is buying a chunk of Valentino as Gucci sales slow: François-Henri Pinault’s French giant secured the US$1.8 billion deal with Qatar’s Mayhoola amid struggles to keep up with LVMH

Jul 31 , 2023

Models present creations by designer Pier Paolo Piccioli as part of his haute couture autumn/winter 2023-24 collection show for fashion house Valentino at the Château de Chantilly near Paris, France, on July 5. Photo: Reuters

Kering SA agreed to buy a 30 per cent stake in fashion house Valentino for €1.7 billion (US$1.87 billion) in cash as growth at Gucci, its biggest brand, continues to sputter.

The French company has the option to purchase the rest of Valentino from its owner, Qatar’s Mayhoola, before the end of 2028, the groups said Thursday. The deal is part of a strategic partnership that could lead to Mayhoola taking a stake in Kering, they said.

A Gucci luxury clothing boutique, operated by Kering SA, in central Paris, France. Photo: Bloomberg

Kering has struggled to keep pace with luxury rivals, especially LVMH, amid a boom in the fashion business that’s helped transform the bigger French firm into the most valuable company in Europe. Last month, Kering agreed to buy perfume maker Creed from funds controlled by BlackRock Inc. and chairman Javier Ferran.

François-Henri Pinault is the CEO of Kering. Photo: Bloomberg

The acquisitions show chief executive officer Francois-Henri Pinault’s urgency to close the gap with its rival. Activist investors including Bluebell Capital Partners Ltd. are circling the French luxury group, with Kering sounding out defence advisers, Bloomberg reported earlier this month.

A model wears a creation for the Valentino haute couture autumn/winter 2023-24 fashion collection presented in Chantilly, north of Paris, on July 5. Photo: AP

The Valentino deal “is a major positive at a decent multiple, and a sound fit to help accelerate growth during a transition period for the Gucci brand”, Bloomberg Intelligence analyst Deborah Aitken said in a note. The brand had revenue of €1.4 billion last year while earnings before interest, taxes, depreciation and amortisation came in at €350 million. It operates 211 stores in more than 25 countries, according to the companies.

Dove Cameron, from left, Ashley Park, Florence Pugh and Zendaya pose for a photographer upon arrival at the Valentino ready-to-wear spring/summer 2023 fashion collection presented in October 2022, in Paris. Photo: AP

Valentino, whose red carpet designs have been worn recently by stars ranging from Zendaya to Florence Pugh, was founded in Italy in 1960 and acquired by Qatar’s Mayhoola for Investments SPC more than a decade ago. Pinault told analysts he believes Kering can boost the brand’s profitability.

Argentinian football player Lionel Messi (centre) holds up his No 30 shirt during a press conference at the French football club Paris Saint-Germain’s (PSG) Parc des Princes stadium in Paris, in August 2021. Photo: AFP

A Kering holding by Mayhoola would mark another prominent French investment for Qatari firms, which have snapped up assets in recent years, including the Paris Saint-Germain football club.

Gucci sales rose just one per cent in the second quarter on a comparable basis, the company said Thursday, well behind the 4.2 per cent gain analysts expected.

Gucci is one of the world’s most well-recognised luxury fashion brands. Photo: Bloomberg

Kering, which gets two thirds of its profit from the brand, has already shaken up leadership to revive its appeal. Last week, the company announced the impending exit of Gucci chief executive officer Marco Bizzarri, to be replaced on a temporary basis by Jean-François Palus, a trusted lieutenant of CEO Pinault. Kering will start a search for a permanent Gucci CEO from September, Pinault said.

Designer Alessandro Michele acknowledges the applause of the public during Gucci Cosmogonie at Castel Del Monte in May 2022, in Andria, Italy. Photo: Getty Images

That follows the November exit of creative director Alessandro Michele, whose flamboyant designs had fallen out of favour. Michele was replaced by Sabato de Sarno, a former Valentino designer who is expected to unveil his debut collection in September in Milan.

Sabato de Sarno will unveil his debut collection for Gucci in September. Photo: @sabatods/Instagram

The agreement with Mayhoola was done “quite fast”, and the goal was to sign the deal before the summer, Kering chief financial officer Jean-Marc Duplaix told analysts in a call.

Want more stories like this? Follow Style on Facebook, Instagram and YouTube.

Gucci

French fashion conglomerate Kering SA has confirmed that it will buy a 30 per cent stake in Italian brand Valentino, as growth at its biggest brand Gucci continues to lag
Valentino, worn by celebrities like Zendaya and Florence Pugh, was acquired by Qatar’s Mayhoola over a decade ago – and the strategic partnership adds to Kering’s ever-expanding portfolio of brands