Kering Slashes Net Debt as L’Oréal Beauty Deal Reshapes H1 Results

Kering’s €4 billion sale of Kering Beauté to L’Oréal has significantly strengthened the luxury group’s balance sheet, helping to slash its net debt by €4.7 billion during the first half of 2026.

The Gucci parent company reported first-half revenue of €7.22 billion, representing a 1% increase on a comparable basis but a 3% decline as reported. Second-quarter revenue rose 2% comparably to €3.65 billion, showing a sequential recovery from the first three months of the year. Meanwhile, rival luxury giant LVMH also demonstrated resilience in its first-half sales, supported by strong growth at Sephora.

Kering's recurring operating income reached €921 million, with the operating margin improving by 40 basis points to 12.8%. Net income attributable to the group stood at €189 million.

“Kering delivered improved performance in the second quarter, with revenue returning to growth,” Luca de Meo, CEO of Kering, said in the group’s first-half earnings release. “These first-half results demonstrate the positive impact of the decisive measures we have taken to reinforce the distinctiveness of our brands, simplify our organization, and increase effectiveness across the Group.”

Beauty Deal Bolsters Cash Position

Kering closed the first half of the year in June with net debt of €3.3 billion, down sharply from €8 billion at the end of December 2025. Cash and cash equivalents reached €8.5 billion, which includes the €4 billion in cash proceeds generated when the sale of Kering Beauté to L’Oréal closed on March 31.

The transaction transitioned the luxury heritage fragrance house Creed to L’Oréal and established exclusive 50-year beauty and fragrance licenses for Kering’s portfolio brands. The two luxury players also plan to explore wellness and longevity opportunities through a joint venture.

Kering's first-half free cash flow from operations reached €2.6 billion. This figure was boosted by €300 million from the Gucci Beauty agreement and €497 million in net proceeds from real estate transactions. Excluding these one-off items, operating free cash flow was €1.8 billion.

The shift from direct beauty operations to a licensing-led model is already reshaping Kering's financial profile. Under the partnership, L’Oréal assumes full responsibility for product development and global distribution. This allows L'Oréal to focus on optimizing its retail footprint, similar to its broader strategy of consolidating digital channels, such as its recent decision to shut down localized brand websites in Hong Kong in favor of major e-commerce platforms and physical retail. Meanwhile, Kering retains lucrative exposure to the high-margin beauty category through brand equity and ongoing royalty streams.

Gucci Beauty Transition Accelerated

Gucci and L’Oréal signed their new 50-year exclusive beauty license on July 7, executing the agreement a year ahead of schedule. The license is set to take effect in mid-2027, replacing Gucci's long-standing beauty license with Coty.

Coty will receive approximately $400 million for the early termination of its licensing rights, with $250 million payable in 2026 and up to $150 million in 2027. Selected inventory will be acquired separately. L’Oréal will reimburse Kering for transition costs equivalent to roughly 70% of the redemption and inventory expenses.

Kering expects the partnership to elevate Gucci’s brand equity and global market share. The fashion house posted first-half revenue of €2.76 billion, down 5% on a comparable basis, though its second-quarter retail decline improved by seven percentage points compared to the first quarter.

Gucci’s second-quarter revenue dipped 2% comparably to €1.41 billion. North America remained the brand's primary growth driver, while Western Europe and the Asia-Pacific region showed early signs of stabilization. The Gucci Beauty transition will proceed through June 2027, with Coty continuing to manage operations before L’Oréal officially assumes control of the business.