Kering has managed to raise eyebrows among investors after it announced a deal to acquire a 30 per cent share in Valentino.
Luxury powerhouse Kering recently announced its plans to acquire a substantial 30 per cent stake in the renowned Italian luxury fashion house, Valentino. Kering's bold acquisition move comes in the aftermath of Kering-owned brand Gucci's struggle to meet performance expectations.
Kering's deal with Valentino is valued at a staggering 1.7 billion euros and would aid Kering in taking a significant step forward in its fashion business. Also, the release of Kering's Q2 financial results has amplified the news of the strategic purchase.
Meanwhile, with the agreement, Kering secures the option to eventually gain full ownership of Valentino. Kering has the right to acquire 100 per cent of the fashion house's share capital by 2028. It is also believed that Qatar's Mayhoola, the owner of Valentino, might invest in Kering as well, which means there is likely a tie-up between the two luxury entities.
Clearly, with Kering's acquisition of Valentino and the possibility of a collaboration between Mayhoola and Kering means, both companies are looking to strengthen their positions in the competitive luxury market.
Nonetheless, with Kering's plans to acquire a 30 per cent share in Valentino, Gucci's ongoing underperformance has raised eyebrows too. While Gucci's second-quarter sales rose by just one per cent, they fell short of the 4.2 per cent growth that analysts had expected.
Hence, Kering, which derives two-thirds of its profit from Gucci, is leaving no stone unturned to revive the brand's appeal. Last week, Gucci's CEO, Marco Bizzarri, made an exit, and it is likely that Jean-Francois Palus, a trusted lieutenant of Kering's CEO, Pinault, will be his replacement. Kering will be looking to onboard a permanent Gucci CEO in September.
While Kering's situation is not that great, other luxury companies, including its larger rival LVMH, have shown double-digit growth. Earlier this week, LVMH reported a 21 per cent increase in sales in its fashion and leather goods division, including those of brands like Dior and Louis Vuitton.
