Coty gives up Gucci for $400m — and loses 15% of its profit voluntarily
The company is handing back its most prestigious licence early. It sounds like capitulation, but the market reads it differently: “Coty is losing its Cinderella, but at Disney franchises are not built on a single princess.”
Coty is exiting its Gucci Beauty licence early in a $400m deal. The company returns its most prestigious licence to Kering a year ahead of schedule, in mid-2027. For the interim chief executive Marcus Strobel, a Procter & Gamble veteran who took the post in January, the 2028 financial year will be a hard one.
The price in figures: on the estimate of the Barclays analyst Lauren Lieberman, Coty is giving up around $115m of annual adjusted EBITDA — roughly 15% of all its profit. The company’s shares have already fallen 80% since the start of 2024.
But the deal has a second half. Coty receives $250m immediately and another $150m by October 2027. Plus potential cash flow from selling down inventory and savings on staff and marketing. The company’s net debt is around $2.9bn, and the ratings agencies are watching it closely: the money will go towards reducing it.
“This is a decision in which all three parties win,” says the beauty industry veteran Alfonso Emanuele de Leon, a partner at FA Hong Kong Consultancy. Kering, it is worth recalling, agreed last year to sell the Gucci fragrance and cosmetics licence along with its entire beauty business to L’Oréal.
Coty knew the licence expired in 2028 and had prepared: since 2019 it has grown Gucci Beauty revenue by 60%, and in 2024 it signed Swarovski, Etro and Marni. Strobel has sharpened the focus on premium fragrance, relaunched Marc Jacobs make-up and is repositioning the mass-market CoverGirl towards an older and wealthier Generation X audience.
“Losing the Gucci licence will prove less painful than many imagine,” believes Akeel Sachak, partner and head of global consumer at Rothschild & Co. “Coty still has a strong fragrance business, and the company diversified in anticipation of the licence ending. It is less dependent on Gucci than the market assumes.”
The company’s history is worth remembering: Coty became a giant in 2015 by buying Procter & Gamble’s fragrance, skincare and cosmetics businesses for $12.5bn. It has since sold its haircare division and is now running a strategic review of cosmetics brands, including CoverGirl and Rimmel.
Michael Ashley Schulman, a partner at Cerity Partners, compares luxury cosmetics with Hollywood: the consistent winners are the studios with a deep library of names, not those who bet everything on one superhero. “Coty is losing its Cinderella, but even Disney knows the strongest franchise is built on a deep roster of evergreen names, not on a single princess.”