As expected, the big European groups raced to get things done before the summer holidays commenced this week: there were deals, there were earnings reports, there were parties. I was bracing for a Sunday morning designer appointment announcement, but I guess everyone really does need a break.
What to make of it all? The biggest story of the month, of course, has been Kering and its quest to regain momentum after tough years at both Gucci and Balenciaga. Following that wild executive shakeup, which I’m tracking closely, was the surprise news that the group would be acquiring a 30 percent, €1.7 billion stake in Valentino with an option to buy it outright by 2028. (Valentino is currently owned by the Qataris through investment firm Mayhoola.) Big picture, this deal makes sense for all the reasons I outlined last week. Valentino is one of the most well-known luxury brands in the world; with a recapitalization of this magnitude, and the support of Kering’s existing infrastructure, it could triple its sales volume over just a couple of years.
What this means for Mayhoola as a long-term entity, I do not know. It was made very clear to me that, while the deal announcement mentioned “other opportunities” for the two groups to work together, this partnership was about Valentino and Valentino only. Balmain, Mayhoola’s other notable brand, is not part of the conversation. (I’m sure Mayhoola C.E.O. Rachid Mohamed Rachid spent time this week reassuring the Balmain team that all is well.) Of course, if Kering does end up buying Valentino and Mayhoola becomes a major Kering shareholder, that could change things.
To me, this deal is the biggest indication yet that it is nearly impossible to compete against Kering and LVMH. Especially if you are a big (but not big enough) brand, like Valentino. Some of my smarter industry friends raised an eyebrow at the implied valuation, given that Valentino generated just €1.4 billion last year. Did Kering overpay? Maybe, but presumably they see the opportunity justifying the premium. We’ll see how quickly Valentino is able to scale with so much extra cash, access to better real estate, sourcing, etcetera.
