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Five Key Questions on Kering and Mayhoola’s Valentino Deal

The French group will pay €1.7 billion for 30 percent of the Italian couture house as the first step in a broader partnership with owner Mayhoola. What will the deal mean for Kering, Valentino, Mayhoola and the wider fashion landscape?
Valentino's haute couture show at the Château de Chantilly.
Valentino's haute couture show at the Château de Chantilly. (Indigital)

Key insights

  • Kering is acquiring 30 percent of Valentino with an option to take over the whole brand within five years.
  • The deal could help Valentino fix its struggle to align its commercial offer with its prestigious haute couture message.
  • It also signals deeper ties between Kering and Valentino- owner Mayhoola, which alongside a recent executive reshuffle, could suggest a pathway to Kering CEO Francois-Henri Pinault's eventual succession.

Earlier this week, the market braced for dim news from Kering’s first-half results: Reports of falling US sales at LVMH bore worrying signs for its smaller rival, which had leaned heavily into the market over the past two years, and where sluggish momentum at flagship brand Gucci showed few signs of turning around.

In the end, an unexpected tie-up with Qatari fund Mayhoola that will see Kering acquire 30 percent of Valentino stole the spotlight: The French luxury giant will pay €1.7 billion ($1.9 billion) for the stake, with an option to buy 100 percent of the Italian couture house by 2028. Meanwhile, Mayhoola, which also owns Balmain and Pal Zileri, could end up becoming an investor in Kering as part of a broader partnership, the group said.

Markets responded as well as could be expected: Kering’s shares were down 2 percent Friday afternoon, a relatively muted response to flat sales at Gucci and a 23 percent drop in group revenue in the US (compared to 1-2 percent declines at LVMH, Prada and Richemont).

In a two-hour call Thursday, analysts grilled Kering — which is fending off pressure over its sluggish growth from activist investor Bluebell — on the rationale for the deal, as well as a recent executive shakeup and the status of Gucci’s turnaround push.

The deal opens up new opportunities for the French group, whose flagship brand was in swatting distance of overtaking Louis Vuitton just a few years ago, but has fallen far behind since the pandemic. It also opens fresh questions about plans for the future structure of Kering, Mayhoola and Valentino — and what that could mean for the fashion industry.

Why Is Kering Interested in Valentino?

A minority stake in Valentino (whose 2022 sales equalled €1.4 billion) will hardly move the needle for Kering: the group’s bigger priority is getting its plan to take ultra-profitable Gucci from €10 billion to €15 billion in revenue back on track.

Still, as Kering said, Valentino is “highly complementary.” If a fashion-forward, decadent spirit is baked into Gucci’s codes — lending itself to funky nostalgia at times and kinky sexuality at others — Valentino has a softer, more timeless take on romance and femininity. As Italy’s most established couture house, it commands a top-end client base and is less exposed to aspirational luxury shoppers who have pulled back from splurging on Balenciaga hoodies and Gucci belts in recent months.

The deal also marks a handsome play in Kering’s turf war with sector leader LVMH, which has hoovered up market share from rivals since the pandemic.

Valentino's haute couture show at the Château de Chantilly.

What Will the Deal Mean for Valentino?

Valentino’s CEO Jacopo Venturini (formerly Gucci’s chief merchandiser) and creative director Pierpaolo Piccioli (who joined the company in 2008 and has been its sole creative chief since 2016) have successfully elevated brand awareness and fuelled a robust trade in pricey ready-to-wear. Sales rose 15 percent to €1.4 billion last year, with EBITDA of €350 million, even as the brand worked on cutting wholesale exposure and phasing out its junior line “Red.”

But Valentino continues to struggle to bridge the gap between its best-in-class haute couture operation and the broader business. Ladylike pillars of the brand’s commercial offer, including Rockstud handbags and V-logo belts, signal status in certain circles, but don’t quite capture the timeless romance and otherworldly perfection suggested by Piccioli’s made-to-measure outings.

Kering has a track record of focusing brands’ messages. During its successive reboots of Saint Laurent, Gucci, Balenciaga and Bottega Veneta, the group honed a playbook for fashion houses to punch above their weight with ultra-coherent communication, collections and store concepts. While Venturini and Piccioli have worked hard to harmonise the brand’s output in recent seasons, there’s still more efficiency to be gained by aligning the brand’s business and audience more closely.

Pierpaolo Piccioli, creative director, and Jacopo Venturini, CEO, are trying to reposition Valentino more firmly in the world of couture. Michael Bailey Gates.

In its comments on the deal, Kering namechecked Venturini’s work to elevate the brand. But while Piccioli is a towering figure in the fashion world, his name was notably absent during Kering’s two-hour investor Q&A (which included just one reference to Valentino’s “recognised creative direction”).

The brand’s next chapter is not without creative challenges. Memorable Piccioli moments like Lady Gaga winning her Golden Globe for “A Star Is Born” in periwinkle crepe couture represent the kind of visibility most brands can only dream of in the social media age. Same goes for July’s haute couture show at the Chateau de Chantilly, where feather-light silk gowns wisped in the summer breeze and pops of chartreuse, seafoam, ivory and cantaloupe put the house’s innovative colour work on display.

But coming up with desirable products at a broad range of price points, which persuade a bigger chunk of the brand’s audience to buy into the dream, continues to be a sticking point in Piccioli’s tenure. Many “stan,” but don’t spend.

What’s in It for Mayhoola?

Mayhoola for Investments — a fund backed by the Qatari royal family and managed by Egyptian businessman Rachid Mohamed Rachid — has been at a crossroads for years.

The fund’s last major fashion acquisition was Balmain in 2016. Both Balmain and Valentino enjoy stable, tenured creative directors and seem to have an edge with the Middle Eastern market in part through the fund’s connections (the Qatari sovereign wealth fund owns Harrods, and its capital Doha has risen sharply as a shopping destination).

Mayhoola’s shareholders don’t need the money. But in a rapidly consolidating sector, taking its brands to the next level will be easier with the support of a bigger group. Real estate, talent acquisition and retention, supply chain agreements, media buying, and back-end digital tools are all ways this tie-up could fuel faster growth and higher margins.

What Could Kering’s Future With Mayhoola Look Like?

Kering chairman François-Henri Pinault described the Valentino stake as a “first step” in its partnership with Mayhoola, with further opportunities on the table. Balmain, too, could stand to benefit from the group’s support should the parties opt for closer links.

Ultimately, Mayhoola could end up becoming an investor in Kering if the company takes full control of Valentino, with a share swap being one way such a deal could be funded.

Bringing on an outside partner could bolster governance and ease Pinault’s eventual succession: The billionaire remains an energetic 61 year-old with little pressure to retire. Still, no other family members are currently involved in running the business. Kering’s move last week to name two deputy CEOs — Saint Laurent chief Francesca Bellettini and longtime CFO Jean-Marc Duplaix — could be a first step in a transition to less direct involvement and more outside support.

Will the Pinaults ever sell? Sources say that even if Kering might need to take additional steps to make room for Mayhoola in its shareholding (one advisor suggested the company could buy existing shares from the open market then use them to pay for Valentino), the family is firmly opposed to reducing their own stake. The company also pledged not to dilute the value of existing shares.

How Will the Deal Impact the Wider Fashion Landscape?

While the deal opens new opportunities for Kering, it doesn’t fundamentally change its position in the market or challenge LVMH’s expanding grip on the luxury sector: While a stake in a world-famous, €1.4 billion per-year business like Valentino is nothing to be sniffed at, it won’t do much to reduce the group’s dependence on €10 billion per-year Gucci. Nor will the deal bring the group much closer to catching up with LVMH, which is targeting €50 billion in fashion sales mid-term.

Still, a tie-up between Kering and Mayhoola could mutually boost access to talent, real estate, suppliers and more. The Valentino deal also comes on the heels of strong financial performance at independent players like Prada, Zegna and Hermès — signs that even in the rapidly consolidating fashion sector, a “winner takes all” scenario remains a long way off.



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Compiled by Sarah Elson.

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