Estee Lauder Acquires Tom Ford’s Brand. Marcolin S.p.A. and Ermenegildo Zegna Group will sign long-term licensing agreements for Tom Ford fashion and Tom Ford eyewear.
It’s official. The Estee Lauder Cos. has taken over Tom Ford’s ownership. This is the first venture by the beauty giant into the fashion industry and the most significant deal it has ever made.
Lauder paid $2.3 billion for the luxury eyewear, beauty, and fashion brand. This was more than Kering, who was previously reported as the frontrunner.
Marcolin S.p.A. and Ermenegildo Zegna Group will enter into long-term licensing agreements for Tom Ford fashion and Tom Ford eyewear. Marcolin has been the eyewear license since 2005, while Zegna has held the license for Tom Ford menswear since 2006. It will now be responsible for all aspects of Tom Ford’s fashion company.
The total enterprise of Tom Ford is valued at $2.8 billion. Lauder will pay $2.3 billion to acquire the assets, net of $250 million Lauder received from Marcolin S.p.A.
Lauder’s largest acquisition follows the agreement to pay $2.2Billion for Deciem’s majority position in 2021.
The agreement stipulates that Tom Ford, the founder and chief executive of Tom Ford, will remain as the brand’s creative visionary until the close of the calendar in 2023. Domenico De Sole (chairman of Tom Ford International) will also continue to serve as a consultant during that time.
Fabrizio Freda (president and chief executive officer of Lauder) stated, “We are extremely proud of the success Tom Ford Beauty achieved in luxury perfume and makeup and its dedication in creating desirable, high-quality products for discerning customers around the globe.” As an owned brand, this strategic acquisition will open new doors and strengthen our growth plans for Tom Ford Beauty. This will help us to continue our momentum in luxury beauty, which is a promising market segment for the long term. It will also reinforce our commitment to being the global leader in pure prestige beauty.
Tom Ford stated, “I couldn’t be happier with this purchase as The Estee Lauder Companies are the ideal home for my brand. They have been an exceptional partner since the very beginning of my creation of the company. I am delighted to see them as luxury stewards for the next chapter of Tom Ford’s history. Marcolin and Ermenegildo Zegna have been long-standing and outstanding partners, and I am pleased to see that the relationship we have enjoyed over the 16 years will be preserved. They will keep the brand’s future as a luxury brand that produces only the best fashion and eyewear with their total commitment. Reading How Beauty Standards Affect Physical Health? could prove to be an excellent way to expand your knowledge or form a fresh perspective.
Ermenegildo Zegna Group CEO, who owns Thom Browne, said that Tom Ford was one of the world’s most iconic and distinctive ultra-luxury brands and that this next step perfectly aligns with the strategy. He said, “We have been shareholders and partners in the Tom Ford fashion company since its inception. I have worked with Tom for many years and consider him an eminent friend.” “This transaction, which is our first since we listed on the New York Stock Exchange in December 2021, confirms our commitment to leverage our platform and create value for all our stakeholders.”
Although this deal is the first fashion venture for the cosmetics giant, Tom Ford Beauty has been a licensee since 2005.
Tracey Travis, executive vice president of Deutsche Bank and chief financial officer, stated that Tom Ford and Jo Malone were two of the largest mid-sized brands in the bank and that they are looking to surpass the $1 billion threshold and become large brands within the next few years.
Not all areas of the beauty division have performed equally well. Earlier this month, Lauder revealed in its first quarter fiscal-year earnings that Tom Ford Beauty makeup was negatively affected by the decline of retail traffic and travel due to COVID-19 restrictions. However, on the plus side, Tom Ford Beauty perfume net sales grew strongly by double digits thanks to launches like Noir Extreme Parfum or Ebene Fume.
Lauren R. Lieberman, a Barclays analyst, said Lauder’s M&A record is mixed. However, an acquisition by Tom Ford would be different because it would acquire the entire profit stream of a business that already operates across the value chain.
“Longer term we wonder if Tom Ford’s acquisition would spark a conversation about the company’s strategic direction and if luxury could be a more viable option. We don’t believe that this would be true, since the company’s core competency and heritage is in prestige beauty and we’d notice the recent addition of Balmain’s license,” she stated.
Lauder has recently reduced its full-year forecast due to COVID-19 lockdowns in China and record high currency fluctuations.
According to the report, full-year net sales are expected to decline between 6 and 8 percent in 2023, down from its earlier forecast of growth of 3 or 5 percent. The adjusted diluted earnings per common stock are expected to decline between 19% and 21 percent, as opposed to the prior forecasts of growth between 5 percent-7 percent.
Freda stated that Freda had spoken in mid-August and that the headwinds from COVID-19 China restrictions, high inflation worldwide, and a strong U.S. Dollar intensified substantially.
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