Luxury group Kering SA has reached an agreement to purchase a 30% stake in the esteemed fashion house Valentino for a sum of €1.7 billion ($1.87 billion) in cash.
The move comes as part of Kering’s strategic efforts to bolster its growth in the high-end fashion market.
The deal also includes a significant option for Kering, headquartered in Paris, to potentially acquire the entire Valentino brand from Qatar’s Mayhoola by the year 2028. This broader partnership between the two companies opens up possibilities for Mayhoola to become a shareholder of Kering.
The announcement of this acquisition comes at a time when Kering’s flagship brand, Gucci, experienced lacklustre sale growth during the second quarter. Despite expectations by analysts of a 4.2% gain, sales at Gucci’s Italian fashion brand only rose by 1% on a comparable basis.
In contrast, other luxury companies, including its larger competitor LVMH, witnessed double-digit growth, with a notable 21% surge in sales within its fashion and leather goods division, housing iconic brands like Dior and Louis Vuitton, as reported earlier this week.
Kering’s Chief Financial Officer, Jean-Marc Duplaix, revealed that the company experienced a considerable 23% decline in North American retail revenue during the second quarter. Duplaix acknowledged that the luxury market in North America remains “more complicated” for the company.
According to Kering CEO Francois-Henri Pinault, the company’s recent results fell short of their aspirations and potential, particularly at Gucci, their flagship brand.
In response to this, Kering initiated a significant management reshuffle, including the departure of veteran Gucci CEO Marco Bizzarri, as part of their efforts to rejuvenate the brand’s sales performance.
Kering also announced plans to secure board representation at Valentino, indicating the seriousness of their investment in the luxury fashion house.
Qatar’s Mayhoola, which acquired Valentino in 2012, will still retain 70% of the share capital. Mayhoola will also continue implementing its success strategy in elevating the brand.
Kering witnessed the exit of creative director Alessandro Michele in November, whose flamboyant designs had lost traction in the market. Sabato de Sarno has taken the helm since, as Michele’s successor, and is set to unveil his debut collection in Milan this September.
With its substantial profit heavily reliant on Gucci, Kering is proactively taking measures to revitalise its premier brand while also capitalising on the opportunity to expand its portfolio through the acquisition of a significant stake in Valentino.
The acquisition of the 30% stake in Valentino is anticipated to be finalised before the end of the year.
Notably, Valentino stands as one of Italy’s most renowned fashion labels, boasting 211 directly operated stores and generating a revenue of 1.4 billion euros in 2022.