For new Kering CEO, offloading Valentino would be tough but smart reset

Reuters

18-07-2025

PARIS/MILAN, July 18 (Reuters) - Luxury group Kering's partner in Valentino was quick to rule out a newspaper report on Friday that the two were considering selling the Italian fashion label.
But that could be just the move that incoming Kering CEO Luca de Meo needs to reset the debt-laden Gucci owner - even if it comes at a cost.
Under current Chairman and CEO Francois-Henri Pinault, Kering bought a 30% stake in Valentino for 1.7 billion euros in 2023 from Qatari fund Mayhoola to diversify away from slowing star brand Gucci, with a commitment to buy the rest by 2028.
However, the deal includes options that could force Kering to buy the remaining 70% as soon as May 2026, company filings show, potentially adding to Kering's 10-billion-euro-plus debt pile.
In a note to clients this month, Bank of America analyst Mark Xu estimated the potential liability at 4-6 billion euros ($4.7-7.0 billion), depending on Valentino's performance.
Revisiting the Valentino deal, which would require bringing Mayhoola back to the negotiating table, will be one of the first and biggest challenges for De Meo, industry experts and bankers say. The former Renault boss was picked in June to turn round the 24-billion-euro French luxury conglomerate.
"With incoming CEO Luca de Meo joining in September 2025, not having to deal with the integration of Valentino may be one less thing on his already long to-do list," RBC analysts said on Friday.
Contacted by Reuters about the report in Italian newspaper Corriere della Sera that Valentino could be put up for sale, Mayhoola CEO Rachid Mohamed Rachid said it was "untrue".
Kering declined to comment.
Kering shares rose 3.5% after the report, outperforming the STOXX Europe 600 index, suggesting investors would welcome a sale.
Investment bankers told Reuters they expect De Meo to start reviewing Kering's entire portfolio. Besides Gucci, the group owns brands including Bottega Veneta and Yves Saint Laurent and high-end perfume label Creed, which Pinault bought in 2023 for 3.5 billion euros amid a wider acquisition spree.
Pinault's swoop on Valentino was meant to create a second flagship brand rooted in haute couture. However, shortly afterwards the luxury sector entered a prolonged slump, and the Italian label appointed former Gucci designer Alessandro Michele to replace long-serving Pierpaolo Piccioli.
Last year, Valentino's revenue declined 2% at constant exchange rates to 1.3 billion euros, while its core earnings (EBITDA) - the crucial variable for any prospective buyer - fell 22% to 246 million euros, filings show.
The slowdown in demand for Valentino's designs put Kering at risk of potentially having to paying an excessive price for the Italian label at a time when the conglomerate is already struggling with rising debt and lower sales, according to three industry sources.
Things at Valentino did not improve much in the first months of 2025, according to one source familiar with the label and a banking source.
Last month, Valentino said its went on sick leave. Adding to its troubles, one of the brand's units has also been put under court administration in Italy after an investigation exposed labour exploitation in its supply chain.
Any near-term sale would therefore have to come at a hefty discount.
"Offloading the asset would make sense for De Meo, but he would have to accept a writedown," said one of the industry sources.
Investors in Kering may swallow the hit if they believe it would allow De Meo to focus on his biggest challenge: reviving Gucci, which still makes up almost two-thirds of Kering's core profit.
For Mayhoola, however, settling for much less than the stellar price tag it achieved in 2023 could be painful.
"The Valentino deal is the best deal Rachid ever made," a source close to Mayhoola told Reuters after De Meo's appointment in June.
($1 = 0.8588 euros)