Tom Ford is the jewel in Estée Lauder’s crown — and it only cost $2.8 billion to keep it there.

After months of speculation, the beauty conglomerate announced Tuesday that it has agreed to buy the Tom Ford brand. Estée Lauder will pay approximately $2.3 billion, with the brand’s eyewear partner, Marcolin, paying Estée $250 million at the closing. Estée said it would fund the transaction through cash, debt and $300 million in deferred payments, which are due in July 2025.

The deal is expected to close in the first half of 2023, pending regulatory approval. In an unexpected twist, Estée Lauder could only confirm that Ford would remain as the business’ “creative visionary” until the end of 2023. Domenico De Sole, his longtime business partner and current chairman of Tom Ford International, will consult for the brand during the transition.

Estée Lauder was reportedly in competition with Ford’s former employer, the French fashion group Kering — which owns Gucci, Yves Saint Laurent and Balenciaga — to purchase the Los Angeles-based luxury brand. (In the 1990s, Ford rose to fame transforming Gucci from a worn-out Italian heritage label into the hottest fashion line of the decade.) Kering, with which Ford and De Sole parted ways in 2004, is said to be interested in developing its own beauty business. Owning a brand like Tom Ford — known for its suiting and glitzy womenswear, but which primarily makes money on cosmetics and fragrance — may have been an interesting prospect.

But in the end, Estée Lauder simply couldn’t afford to lose Ford’s beauty line, which it has manufactured, marketed and sold in a licensing arrangement since 2006. Tom Ford is one of the cosmetics giant’s most lucrative businesses, posting strong growth even as some of the company’s other stalwart brands have faded.

“It’s really a very pure luxury brand,” said Marie Driscoll, managing director of luxury and fashion at consultancy Coresight Research. “It’s not old or tired; there is nothing you have to go in and have to fix up. You’re starting with a great piece of clay.”

As for Ford’s fashion and accessories business, Estée Lauder will license the intellectual property to others that will handle the day-to-day management. Early Tom Ford partner Ermenegildo Zegna Group has forged a long-term agreement with Estée Lauder that will see it continue to make and sell the brand’s menswear, plus women’s fashion, accessories and underwear for the first time. Zegna has acquired Tom Ford’s fashion business — set up as a separate entity from Tom Ford intellectual property, which was owned solely by Ford — so that there is already an infrastructure in place. Marcolin will also continue making the eyewear.

Pushing Boundaries

Tom Ford Beauty became an instant sensation 16 years ago when it debuted with a single fragrance, Black Orchid. Under Lauder’s stewardship, the brand quickly established itself as a serious player in fragrance before entering colour cosmetics, first with lipstick in 2010, quickly expanding into a full makeup range in 2011. Ford’s perfume and lipsticks – which today cost $58 a tube – were among the most sought after. They’ve even managed to maintain their hold on consumers as successive waves of “clean,” direct-to-consumer and influencer brands saturated the market.

Tom Ford Beauty oozed the glamour, sex appeal and luxury that was missing from decades-old brands like Clinique and Estée Lauder. The line, always accompanied by Ford’s signature, splashy marketing and ad campaigns also appealed to a younger customer.

Ford pushed boundaries for the buttoned-up beauty giant, most notably when eau de parfum “Fucking Fabulous” launched in 2017.

“First of all, they [Estée Lauder Cos.] didn’t even want to launch it. I kept calling it Fucking Fabulous and I’d get it back with an asterisk,” Ford told BoF in a 2018 interview. “I was like ‘No no, we’re going to spell it out on the bottle.’ They had such a hard time understanding that. They said ‘You can’t put it online, we can’t sell it in Neiman Marcus … Can you call it ‘F-in Fabulous?’”

Created primarily as a limited-edition drop to boost brand awareness – revenue projections were around $500,0000 – the fragrance wound up selling approximately 60 times that, or $25 million. The scent became a permanent part of the collection (a PG-13 version of the bottle was created for more conservative markets).

Smells Like Success

When Black Orchid debuted in 2006, fragrance was mostly dominated by blockbuster scents from leading fashion houses at approachable prices. Within a year of the now-iconic scent’s launch, a Private Blend collection of 10 perfumes hit the market – each priced at $220. Ford became a bonafide authority in fragrance.

The brand helped make the concept of paying over $200 for a perfume a mainstream customer behaviour, paving the way for other niche lines like Byredo, D.S. & Durga and Maison Francis Kurkdjian. In 2014, Lauder invested in fragrance further, acquiring a trio of higher priced indie lines, Le Labo, Frédéric Malle and By Killian, each with average price points of well over $200 (a 50 ml. bottle of Le Labo’s bestselling Santal 33 costs $215 and a 100 ml. size is $310).

High-end fragrances emerged as beauty’s MVP during the pandemic and continues to flourish even as other Covid-era trends have faded.

According to NPD, prestige fragrance sales in the US for the third quarter were $1.3 billion, an 11 percent increase from the year prior. Compared to other beauty categories, average prices for fragrances grew at a faster clip, fuelled by customers seeking pricier luxury lines with higher concentrated formulas – like Ford’s. From 2020 to 2021, US sales from luxury fragrance brands, a category including Tom Ford Beauty, nearly doubled.

“Consumers [are] indulging and ‘premium-ising’ which we saw playing out in fragrances because they were buying more expensive products,” Larissa Jensen, vice president and industry analyst at The NPD Group, said in a previous interview. “They were buying the $300 juice versus the $80 juice.”

Tom Ford Beauty’s other bright spot is makeup, which comprises a meaningful portion of the label’s sales, and as a category overall continues to gain momentum as people return to their pre-Covid, mask-free lives.

“The bottom line is this is a very exciting time for the makeup category,” Jensen said.

According to NPD, US sales for prestige makeup surpassed pre-pandemic revenues from 2019, but growth within the luxury sub-category (priced 75 percent higher, on average, than total prestige makeup) is outpacing the rest of the sector. In 2021, total makeup was up 23 percent, and luxury brands – including labels like Chanel, Dior and Tom Ford Beauty – were the fastest growing brand type.

A Foundation for Growth

By owning Tom Ford outright, Estée Lauder will have more freedom to expand the brand – and guarantees it won’t wind up in the hands of a competitor.

“Yes, they paid a lot but now they [Estée Lauder] won’t lose it,” Driscoll said. “There are other ways to grow the brand – not harvest the value of the brand, but actually grow the brand.”

She cited potential areas of growth Lauder could focus on – including lifestyle in areas like tabletop, sheets and towels.

And Estée Lauder has plans to replicate Tom Ford Beauty’s success with Balmain, which it inked a licensing deal with earlier this year. Similar to the arrangement it had with Ford since 2006, the beauty giant will manufacture, market and distribute makeup and other products for the French fashion house, which was acquired by Qatar-based investment fund Mayhoola in 2016 for over $600 million.

What About the Clothes?

The fashion side of Ford’s business will be in familiar hands.

Zegna is best known as a maker and supplier of fine suiting, shirting and other formalwear reminiscent of a bygone era when men more regularly wore ties to work. Today, Zegna faces competition from an array of labels catering to the rich guys’ proclivity for more casual, less gendered attire, from outdoor apparel firms like Arc’teryx to cashmere king Brunello Cucinelli.

As a response to changing tastes, Zegna has loosened up, taking a stronger fashion point of view on the runway with a collection designed by Alessandro Sartori, and acquiring avant garde-meets-Americana brand Thom Browne in 2018. It also did away with a downmarket sub-brand, ZZegna, which at one time contributed a significant amount to the firm’s annual sales. In 2021, the year of its debut on the New York Stock Exchange, the Milan-based company generated €1.29 billion ($1.34 billion), up 27 percent from a year earlier.

“We had to change the perception of the brand from a tailoring luxury brand to a lifestyle luxury brand,” CEO Gildo Zegna told BoF in April 2022, or “we’ll be in trouble.”

While Tom Ford became famous at Gucci and Yves Saint Laurent for womenswear, his own brand’s suiting and shirting, manufactured in partnership with Zegna and designed for many years out of a London studio, was his biggest fashion category, though sales paled in comparison to the beauty behemoth.

For Zegna, which has the capabilities and infrastructure to build out the Tom Ford line further, acquiring the license for products outside of Estee’s realm may have a significant upside, especially if it can expand its reach in womenswear, a category that Zegna entered when it bought Thom Browne.

For Ford and De Sole, the exit marks the end of their entrepreneurial journey, which began when they left Kering (then known as PPR) in 2004 over creative differences. Over the years, the Los Angeles-based Ford, who lost his longtime partner, Richard Buckley, in September 2021, has pursued other arts, including directing critically acclaimed films, and has privately expressed an interest in winding down his time in fashion, according to multiple sources.

Ford, who played Freddie Mercury singing “time waits for no one” at his latest runway show, which closed out New York Fashion Week in September, is once again leaving on his own terms.