Welcome back Builders!

I hope everyone had a great weekend. This week, we’re turning to Kering, the luxury conglomerate behind brands like Gucci, Balenciaga and Bottega Veneta as it makes a bold pivot away from beauty and back toward its core. This is about when your size combined with the complexity of your business becomes a liability rather than an asset. With that said, let’s dive into this titan of the high fashion industry.

Kering has long been an icon of luxury fashion, but in recent years the company has tried expanding into other opportunities. In 2023 it acquired the high-end fragrance house Creed and launched Kering Beauté (Their Beauty Division) with the ambition of expanding into beauty products for its fashion houses.

The logic was sound: beauty offers higher margin, broader reach and entry-points for consumers beyond the runway look of luxury bags and apparel. It was also seen as an easy plug and play, make the product, put a designer name on the bottle and prepare for the influx of sales. Yet for Kering the move soon exposed a problem within their operations. By 2025 the numbers and the market environment were signaling a reckoning. Kering’s flagship brand Gucci was experiencing falling demand, especially in China, and the broader luxury market faced headwinds.

The beauty division, having just opened two years prior had yet to deliver the scale or margin improvement that would justify the complexity it added to Kerings operations. In this context the company’s net debt climbed to around €9.5 billion, with an additional €6 billion in lease liabilities, raising investor concern.

With investor fears on the rise, Kering announced it would sell its beauty business to L’Oréal for approximately €4 billion (around US $4.66 billion). The deal includes the fragrance brand Creed and rights for L’Oréal to develop beauty and fragrance products for Kering’s key fashion houses (Gucci, Balenciaga, Bottega Veneta) under 50-year exclusive licenses.

This moment marks the turning point where Kering needs to find what their brand truly is. With that, lets look at where Kering all started.

The story of Kering is one of radical reinvention. Founded in 1963 by François Pinault as a small timber-trading company in Brittany, France, the business spent its early decades focused on wood and construction materials. By the late 1980s, Pinault had begun acquiring retail chains, transforming his once-industrial business into a consumer-facing powerhouse under the name Pinault-Printemps-Redoute (PPR).

Throughout the 1990s, PPR expanded aggressively into fashion, acquiring Gucci in 1999 in what became one of the defining moves in modern luxury history. That single acquisition pulled PPR out of the retail world and into high fashion. Over the next decade, the company added Yves Saint Laurent, Balenciaga, Bottega Veneta, Alexander McQueen, and Brioni, evolving into a global luxury group.

By 2013, the transformation was complete. The company formally rebranded from PPR to Kering, signaling its new identity and purpose. The name, derived from the Breton word “ker” meaning “home,” represented both heritage and vision, a home for luxury brands rooted in creativity and craftsmanship.

Under the leadership of François’s son, François-Henri Pinault, Kering entered the modern era as one of luxury’s “big three” conglomerates alongside LVMH and Richemont. The group’s strength lay in its diversity of brands, each with its own creative identity yet supported by shared systems in finance, operations, and global retail.

But as the company grew, it also grew more and more complex. Gucci became both its crown jewel and its Achilles heel, driving more than half of total revenue. When Gucci stumbled, Kering’s entire performance followed. Over time, maintaining that balance between creative freedom and corporate discipline became increasingly difficult.

The launch of Kering Beauté in 2023 was meant to be the group’s next frontier, a move into beauty that would match the global scale of its fashion portfolio. Instead, it became the latest reminder that even a company built on reinvention can sometimes expand beyond its natural limits.

Enter Luca de Meo, appointed CEO in September 2025 with a clear mandate to simplify and focus. His first move was decisive: offload Kering Beauté, reduce debt, and return the company to its core competency, fashion and leather goods. The sale to L’Oréal was not a fire-sale but a calculated trade. Kering would keep creative control of its fashion brands while licensing out the beauty operations to a partner with unmatched expertise and scale.

The deal also opened the door to new collaborations between Kering and L’Oréal in wellness and longevity products, spaces adjacent to luxury but less capital-intensive. This partnership allows Kering to benefit from beauty’s growth without carrying its operational burden.

By Luca de Meo’s reasoning, Kering didn’t just sell a part of its business; it bought back its focus.

Every enduring business faces a moment when its own ambition becomes the biggest threat to its stability. Kering’s move underscores a truth many leaders overlook: diversification without discipline can erode the very strengths that made a company great.

The pressure Kering faced wasn’t purely financial, it was existential. In luxury, brand clarity is currency. Owning too many directions risks blurring that identity. The beauty division, while promising on paper, consumed leadership attention and resources that should have been spent revitalizing Gucci, refocusing Balenciaga, and deepening the creative capital of the group’s core houses.

By choosing subtraction over expansion, Kering did something rare for a legacy company: it publicly showed it has “failed” in a new venture so that they could hone back to their traditional bread winners. The message was clear growth isn’t always about doing more. Sometimes it’s about removing what no longer fits.

Kering’s divestment marks more than a financial transaction. It’s a statement about what it means to be built to last. The company realized that endurance isn’t about owning everything, it’s about mastering the essentials and forming smart partnerships for the rest.

If this pivot works, Kering will reemerge leaner and sharper, with room to reinvent Gucci and strengthen its creative houses. If it doesn’t, it will still serve as a reminder that even the most successful conglomerates can lose their way when growth over all else becomes the main priority.

Either way, the lesson stands: lasting companies are not the ones that diversify endlessly but the ones that know when to return home.

That’s a wrap on this week’s edition of Built to Last!

We’d love to hear from you: Who should we feature next week? Is there a company you think embodies what it means to be built to last or one facing the kind of crossroads we love to explore?

Reply to this email and let us know your pick (and why) and we’ll consider it for a future edition. Thanks for reading, sharing, and helping us grow this community of founders, operators, and curious builders.

See you next week!

— The Built To Last Team

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