L’Oréal Eyes Giorgio Armani‘s Beauty Empire Amidst Speculation Following Designer’s Death

The recent passing of iconic fashion designer Giorgio Armani has ignited a flurry of speculation regarding the future of his eponymous brand. As the fashion world mourns the loss of the 91-year-old mogul, attention has turned to potential investors, with L’Oréal SA emerging as a key player interested primarily in the brand’s lucrative beauty segment.

A New Chapter for Armani

Giorgio Armani, who passed away earlier this month, left behind a legacy that spans decades and encompasses a diverse portfolio, including ready-to-wear clothing, haute couture, and interior design. His will indicated that his heirs should seek to sell an initial 15 percent stake in Giorgio Armani SpA within 18 months, with L’Oréal, LVMH Moët Hennessy Louis Vuitton SE, and EssilorLuxottica SA named as preferred bidders. Notably, the buyer would have the option to increase their stake to a majority after three years, setting the stage for a significant shift in the brand’s ownership.

L’Oréal’s Strategic Interest

According to sources familiar with the situation, L’Oréal’s interest is primarily focused on the beauty division of Armani, which includes fragrances, skincare, and makeup. The French beauty giant currently holds a licensing agreement with Armani to market these products until 2050. This partnership has proven lucrative, generating approximately €1.5 billion ($1.8 billion) in revenue last year, which accounts for about 10 percent of L’Oréal’s luxury division and 3.45 percent of its total sales, as reported by HSBC analysts.

While L’Oréal is evaluating the sale process, it remains committed to its core beauty strategy. The company has a history of investing in fashion brands to expand their beauty offerings, as evidenced by its recent minority stake acquisition in Jacquemus, a rising star in the fashion industry.

The Competitive Landscape

The competition for Armani’s stake is fierce, particularly between L’Oréal and LVMH, both of which are vying for a piece of the luxury beauty market. LVMH, which owns high-end cosmetics brands like Parfums Christian Dior and Guerlain, has also recently expanded its beauty offerings with products like €140 lipsticks under the Louis Vuitton label. However, analysts suggest that LVMH may not be the ideal fit for Armani’s ready-to-wear segment, which is complex and may not align with the conglomerate’s current strategy of “managing fewer better brands.”

Financial Insights

Analysts at Berenberg have valued the entire Armani brand at up to €7 billion. In 2024, the brand reported consolidated revenue of €2.3 billion, a decline of 5 percent from the previous year. Notably, this figure primarily reflects earnings from the fashion and interior decoration lines, excluding royalties from the beauty business. The bulk of Armani’s earnings before interest, taxes, depreciation, and amortization (EBITDA) came from the licensing deal with L’Oréal, which saw a significant drop to €398 million.

Potential Outcomes

Should L’Oréal emerge as the primary buyer, it could follow a strategy similar to that of Estée Lauder Cos Inc, which acquired Tom Ford to gain control over a valuable beauty license while partnering with Ermenegildo Zegna NV to manage the fashion line. This approach would allow L’Oréal to maintain the beauty segment while potentially licensing out the fashion division.

Meanwhile, EssilorLuxottica, known for its eyewear, remains a wildcard in the bidding process. The company has previously surprised the market with its acquisitions, including the purchase of streetwear brand Supreme. A spokesperson for EssilorLuxottica stated that the company would carefully consider the “evolutionary prospect” presented by Armani’s will.

Conclusion

As the fashion industry grapples with the implications of Giorgio Armani’s death, the future of his brand hangs in the balance. With L’Oréal, LVMH, and EssilorLuxottica in the running, the outcome of this bidding war could reshape the landscape of luxury beauty and fashion. The focus on Armani’s beauty segment underscores the growing importance of this market, as companies seek to capitalize on the lucrative opportunities it presents. As the sale process unfolds, stakeholders will be watching closely to see how this iconic brand navigates its next chapter.