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31 Dec

The Estée Lauder Cos. to Acquire Tom Ford – WWD

It’s official: The Estée Lauder Cos. is the brand new owner of Tom Ford, marking the beauty giant’s first enterprise into the style world and its biggest deal ever.

Paying $2.3 billion to amass the posh fashion, beauty and eyewear brand, Lauder outbid rival Kering, which was reported earlier this month to be a front-runner for the corporate.

Ermenegildo Zegna Group and Marcolin SpA will enter long-term license agreements for Tom Ford fashion and Tom Ford eyewear, respectively. Marcolin has been the eyewear licensee since 2005, while Zegna has had the license for Tom Ford menswear since around 2006. Now, it is going to be answerable for all of Tom Ford’s fashion business.

The deal values the entire enterprise of Tom Ford at $2.8 billion. The quantity to be paid by Lauder for the acquisition is roughly $2.3 billion, net of a $250 million payment to Lauder at closing from Marcolin SpA.

The acquisition is Lauder’s biggest so far, following the company’s agreement to pay $2.2 billion for a majority position in Deciem in 2021.

Under the agreement, Tom Ford, founder and chief executive officer of Tom Ford, will proceed to serve because the brand’s creative visionary after closing and thru the top of calendar 2023. Domenico De Sole, chairman of Tom Ford International, will stay on as a consultant through that period, too.

“We’re incredibly pleased with the success Tom Ford Beauty has achieved in luxury fragrance and makeup and its dedication to creating desirable, high-quality products for discerning consumers around the globe,” said Fabrizio Freda, president and CEO of Lauder, in a press release. “As an owned brand, this strategic acquisition will unlock recent opportunities and fortify our growth plans for Tom Ford Beauty. It’s going to also further help to propel our momentum within the promising category of luxury beauty for the long run, while reaffirming our commitment to being the leading pure player in global prestige beauty.”

Tom Ford said, “I couldn’t be happier with this acquisition because the Estée Lauder Corporations is the perfect home for the brand. They’ve been a rare partner from the primary day of my creation of the corporate and I’m thrilled to see them change into the posh stewards on this next chapter of the Tom Ford brand. Ermenegildo Zegna and Marcolin have been spectacular long-standing partners as well and I’m pleased to see the preservation of the nice relationship that we’ve got built over the past 16 years. With their full commitment, I trust they may proceed the brand’s future as a luxury company that strives to supply only the highest-quality fashion and eyewear.”

For its part within the deal, Ermenegildo “Gildo” Zegna, CEO of Ermenegildo Zegna Group, which owns Thom Browne, described Tom Ford as one of the vital “iconic and distinctive ultra-luxury brands on this planet” and said this next step together perfectly aligns with its strategy. “We now have been partners and shareholders of the Tom Ford fashion business since its inception and I even have worked with Tom for a few years and consider him an esteemed friend,” he added. “This transaction is our first since our listing on the Recent York Stock Exchange in December 2021, and confirms our commitment to leverage our platform to create value for all of our stakeholders.”

While such a deal marks the cosmetics giant’s first foray into fashion, it has had a licensing partnership with Tom Ford Beauty since around 2005.

At a Deutsche Bank conference earlier this 12 months in Paris, executive vp and chief financial officer Tracey Travis said: “Tom Ford and Jo Malone are two of our largest midsized brands which might be knocking on the door of being over that $1 billion threshold to be large brands over the following couple of years.”

But not all parts of the wonder arm have been performing equally well. Lauder revealed earlier this month in its first-quarter fiscal-year earnings that Tom Ford Beauty makeup was negatively impacted by the decline in retail traffic and travel as a result of the COVID-19-related restrictions, but on the positive side, Tom Ford Beauty fragrance net sales grew by strong double digits, powered by launches reminiscent of Noir Extreme Parfum and Ébène Fumé.

Barclays analyst Lauren R. Lieberman added that although Lauder’s recent M&A track record has been mixed, an acquisition of Tom Ford can be different as it will be acquiring the total profit stream for a business it’s already operating across the worth chain.

“Longer-term, we do wonder if an acquisition of Tom Ford would trigger conversation across the strategic direction of the corporate and if broader participation in luxury could possibly be within the cards. From our seat, we don’t consider this may be the case, as the corporate’s heritage and core competency is in prestige beauty, and here we’d note the very recent addition of the Balmain license,” she said. 

Lauder recently slashed its full-year forecast as COVID-19-related lockdowns in China, record high inflation and currency fluctuations weigh on the beauty giant.

It reported that full-year net sales are projected to diminish between 6 and eight percent within the 2023 financial 12 months, down from its previous forecast of growth of three to five percent. Adjusted diluted earnings per common share are expected to fall between 19 and 21 percent, versus prior expectations for growth of between 5 and seven percent.

On the time, Freda said: “Since we spoke in mid-August, the headwinds of COVID-19 restrictions in China, high inflation globally, and a robust U.S. dollar intensified significantly.”

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