For new Kering CEO, offloading Valentino would be tough but smart reset
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)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
4 hours ago
- Reuters
Ambani's Reliance tops profit estimates on asset sale gains
July 18 (Reuters) - Indian billionaire Mukesh Ambani's Reliance Industries ( opens new tab reported a better-than-expected 78% surge in first-quarter profit on Friday, driven by strong growth across key businesses and gains from the sale of its stake in Asian Paints ( opens new tab. The profit jump was underpinned by a recovery in Reliance's core oil-to-chemicals segment, which benefited from improved refining margins and petrochemical demand. Strong performances from its retail and digital services arms also bolstered earnings. Additionally, a sharp rise in other income, led by the sale of its stake in Asian Paints, boosted profit. The conglomerate's other income nearly quadrupled to 151.19 billion rupees in the June quarter, with 89.24 billion rupees stemming from the investment sale. Reliance, India's biggest company by market value, in June sold a stake in Asian Paints , worth about $1.12 billion. Reliance Retail and Jio, which together account for roughly 45% of the company's revenue, had been the engine powering the conglomerate's earnings in the six months to March, while offsetting a slowdown in the oil-to-chemicals segment, its largest revenue contributor. Reliance's consolidated profit jumped to 269.94 billion rupees ($3.14 billion) in the June quarter, up from 151.38 billion rupees a year earlier, smashing analysts' estimate of 198.59 billion rupees, according to LSEG data. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the oil-to-chemicals business rose 10.8% to 145.11 billion rupees. EBITDA from its Jio Platforms rose 23.9% year-on-year, the strongest growth among its segments, while retail EBITDA increased 12.7%. Jio Infocomm, its telecom unit, logged a 23.3% rise in net profit, while revenue rose 16.6%. The company said it was on track to set up its planned "giga factories" in the next four-to-six quarters and that, once operational, the business would be self-sustaining, without requiring further investment from Reliance. Reliance, which operates the world's largest refining complex in Jamnagar, Gujarat, announced a $10 billion investment in 2021 to build its green energy portfolio and achieve net-zero carbon emissions by 2035. ($1 = 86.0620 Indian rupees)
Times
6 hours ago
- Times
Burberry boss calls for return of VAT-free shopping
Britain could regain its crown as Europe's No 1 shopping destination if the government brought back VAT-free shopping for tourists, according to the boss of Burberry. Joshua Schulman, chief executive of the British luxury label, said international consumers were still 'not shopping in the UK to the extent that we would like due to the lack of a VAT refund scheme'. He called on the UK government to reintroduce the scheme, which was scrapped in 2021 as part of the decision to leave the European Union. France and Italy have continued to benefit from the VAT schemes they offer. Shares in the trenchcoat-maker rose almost 6 per cent on Friday after it posted its strongest sales performance in 18 months and Schulman, who joined Burberry last year, expressed 'conviction' about his turnaround plan. He said reinstating the scheme would encourage tourism and benefit all luxury and retail brands. It would be 'a real lever for growth' and a 'great opportunity for the UK to become the No 1 shopping destination in Europe'. It would also support British brands that have struggled to compete with international competitors since the scheme was scrapped. This has played a part in Burberry's decline, although its boss has admitted that most of its problems were of its own making. The decision to remove the scheme, which allowed international shoppers to reclaim 20 per cent VAT on purchases, proved deeply unpopular among the UK's retail and hospitality sectors. There have been hundreds of calls for it to be reversed, including from Helen Brocklebank, chief executive of Walpole, the official body for the UK luxury sector, who said it was a 'crazy, wrong-headed decision'. The last Conservative government decided against reintroducing the scheme after a review by the Office for Budget Responsibility (OBR) concluded that projections it made in 2020 'still appear reasonable'. It had estimated that withdrawing the scheme would save the exchequer around £540 million per year by 2025-26, while restoring it would cost £2 billion. The new Labour government appears unwilling to launch a new scheme. A Treasury spokesman recently said it had 'no plans to introduce a new tax-free shopping scheme in Great Britain', adding: 'Visitors can continue to claim VAT relief where the items purchased are shipped directly to their home country as exports.' Several industry sources say they believe ministers are ignoring the effect on the wider UK economy. A government spokesman said: 'The UK is one of the most visited countries in the world and international tourism drives billions into our economy. 'We are supporting the continued growth of this industry and will be launching a national visitor economy strategy this autumn to help meet our ambition to welcome 50 million international visitors a year to the UK by 2030.' Music festivalgoers wishing to stand out from the crowd in Burberry wellies, scarves and jackets helped a sales recovery at the company. Schulman acknowledged that trading remained 'challenging' and said the brand still had a long way to go. However, he pointed to progress in slowing the pace of decline in sales, as well as 'stabilisation' in its key China market. • Why China's giving Burberry a reality check Comparable retail sales fell 1 per cent in the three months to June 28, compared with a 6 per cent fall in the previous quarter and a 21 per cent slump a year earlier. Analysts had forecast a 4 per cent drop. Total retail revenue declined 6 per cent to £433 million, which the company attributed in part to a 4 per cent currency headwind. On a constant currency basis, sales were down 2 per cent. The company said demand for seasonal items such as its lightweight coats with checked trims, pool slides, silk scarves and wellies had helped support performance in the run-up to summer. New marketing campaigns and events have played a central role. Burberry launched adverts featuring Liam Gallagher and his children Lennon, Gene and Molly Moorish-Gallagher before the Oasis reunion tour. Schulman said Burberry had appealed to both younger luxury shoppers via festival-linked pop-ups featuring DJ sets in shopping centres — which showed a 'different side of Burberry' — and to 'elite VIP' customers, through exclusive events linked to its partnership with the King's Highgrove estate. 'We are appealing to a much broader range of luxury consumers,' Schulman said, noting the brand had started to attract 'younger, high-spending extrovert consumers who want to stand out from the crowd' as well as more traditional loyalists. A trial of in-store 'scarf bars' proved successful, it said, with plans to roll out 200 globally. Burberry also cited signs of 'stabilisation' in China, which accounts for about 30 per cent of sales and has been hit by macroeconomic pressures. Sales continued to fall in Asia overall, but the company said it had seen progress in the region. It also noted growth in Europe and the US, despite lower tourist numbers. • Watch: How Burberry's check survived fashion's biggest identity crisis Schulman was previously head of Coach and Michael Kors before joining Burberry. His plan, called 'Burberry Forward', aims to re-anchor the brand in its British roots and return Burberry to 'timeless British luxury' with a focus on outerwear. Its classic check-print coats now retail at £1,900, with signature scarves priced at £420. Since he joined, the company's share price has gained about 66 per cent, but is still trading well below its peak as investors remain wary after several failed turnarounds under previous bosses. Schulman admitted Burberry was still 'in the early stages of our turnaround', but said he was optimistic about its future. The business is on track to deliver £80 million of its planned £100 million in cost savings this financial year and has reorganised under four regional presidents to boost efficiency. In May Burberry said it would cut 1,700 jobs over two years — about a quarter of its UK workforce. At the time Schulman said he was 'more optimistic than ever that Burberry's best days are ahead', despite the redundancies. He was paid £2.5 million for the year to the end of March. The company refrained from issuing full-year guidance, citing ongoing macroeconomic uncertainty. Schulman acknowledged that the second quarter, which includes the key summer period, would be critical: 'It's a tough macro [environment] out there and we are taking things step by step, but we are optimistic about the quarters ahead and the business in general.' Garry White, chief investment commentator at Charles Stanley, said: 'Encouragingly, Burberry's turnaround strategy — focused on product refinement, store optimisation, and digital investment — appears to be stabilising its recent poor performance.' However, he said it was 'too early to declare a full recovery in the troubled luxury sector'. Analysts at Deutsche Bank said 'further material growth henceforth will depend largely on the company's ability to replicate the success of its core categories onto non-core segments to drive growth and profitability'. Shares in Burberry were up 69½p, or 5.6 per cent, to £13.17½ at the close on Friday.
Reuters
7 hours ago
- Reuters
Autostrade CFO Peluso to return to Telecom Italia as finance chief, sources say
MILAN, July 18 (Reuters) - Piergiorgio Peluso, Chief Financial Officer of motorway operator Autostrade per l'Italia, is set to take over the top finance job at Telecom Italia (TIM) ( opens new tab, two sources told Reuters on Friday. Peluso, 57, previously served as TIM's CFO for seven years until 2019. He will rejoin the former phone monopoly next month, the people said. Spokespeople for TIM and Autostrade per l'Italia declined to comment. TIM had been searching in recent months for a successor to current CFO Adrian Calaza, as he is expected to leave the company later this year, sources previously told Reuters. Calaza, an Argentine national and former CFO of TIM's Brazilian unit ( opens new tab, took on the job of group finance chief in 2022. He oversaw last year's landmark sale of TIM's fixed-line network to a consortium led by U.S. investment firm KKR (KKR.N), opens new tab, a deal aimed at slashing the company's debt by 14 billion euros ($16.32 billion). Peluso's return to TIM is expected to be announced on August 5, when TIM's board meets to approve first-half results. He will assume the CFO role at a later date, one of the sources added. In May, TIM returned to state-backed hands, with financial conglomerate Poste Italiane ( opens new tab replacing France's Vivendi as the company's largest shareholder, with a 24.8% stake. ($1 = 0.8580 euros)
