Coty sues Kering over Gucci beauty license dispute

A subsidiary of beauty conglomerate Coty has reportedly initiated legal proceedings against luxury fashion group Kering in the UK, stemming from issues related to the recently announced loss of its beauty license for Gucci. The lawsuit was apparently filed on October 20 by HFC Prestige International Operations Switzerland Sàrl, targeting Gucci America Inc, Guccio Gucci SpA, and Kering SA.

Coty currently holds the prestigious Gucci beauty and fragrance license, which is contractually set to expire in 2028. However, a significant development occurred last month when Kering announced the sale of its overarching beauty business rights to L’Oréal for a substantial €4 billion ($4.7 billion). This extensive deal encompasses not only the Gucci beauty business but also other prominent licenses such as Creed, Bottega Veneta, and Balenciaga. Notably, L’Oréal already manages the cosmetics and fragrances for Yves Saint Laurent.

While specific details remain scarce, reports, initially surfaced by WWD, suggest that the lawsuit centers on general commercial contracts and arrangements. The precise nature of the disputes is yet to be publicly disclosed, fueling considerable interest within the industry.

Prior to the lawsuit, both Kering and Coty had made public statements addressing the future of their agreement. Kering had affirmed its commitment to honoring existing contractual obligations with Coty. Similarly, Coty’s CEO had publicly stated that the company intended to operate the Gucci business “until the last hour of the contract,” emphasizing continuity despite the impending change in ultimate ownership of the beauty rights.

In the absence of concrete information regarding the legal action, speculation has been rife concerning the exact nature of the issues at play. Much of the discourse has focused on the potential impact the license termination could have on Coty's operations and, critically, whether the license might be brought to an early conclusion, a possibility that both companies had previously downplayed.

The financial implications for Coty are significant. According to analysis from firm Evercore ISI, sales of Gucci products contribute approximately 8% to Coty's overall revenue, representing a notable portion of its total 11% profit share. This underscores the strategic and financial importance of the Gucci license to Coty’s portfolio.