Coty sues Kering over Gucci Beauty license, putting 2028 handover at risk
Bottom Line Impact
Litigation raises execution risk and may compress near-term revenue and margin for Coty while strengthening Kering’s leverage to optimize Gucci Beauty’s long-run positioning with L’Oréal, with brand equity outcomes hinging on a tightly managed, compensated transition.
Key Facts
5- License timeline: Coty holds Gucci Beauty through 2028; Kering and L’Oréal announced a 50-year exclusive license to begin post-2028
- Financial exposure: Evercore IRI estimates Gucci at ~8% of Coty sales and ~11% of profit; implies roughly $450m–$520m revenue and $70m–$100m profit contribution based on Coty revenue in the $5.7bn–$6.5bn range
- Legal action: Coty’s Swiss unit filed suit in a UK commercial court against Gucci and Kering; both sides state intent to defend their rights
- Operator history: Coty has operated Gucci Beauty since 2016 across fragrances and color cosmetics
- Management stance: Coty signaled defending rights through contract end but left open evaluating an early exit if it creates tangible value
Time Horizons
Key Roles Affected
Executive Summary
Coty has filed a UK lawsuit against Kering and Gucci over the Gucci Beauty license, which is set to transfer to L’Oréal under a 50-year exclusive deal starting in 2028. With Gucci contributing an estimated 8% of Coty sales and 11% of profit, litigation introduces execution risk to transition planning, capital allocation, and retailer confidence, potentially altering timing and economics of any early exit or handover.
Actionable Insights
Immediate Actions (Next 30-90 days)
Model three exit scenarios (on-time 2028, 6-month early, 12-month early) with explicit EBITDA, working capital, and covenant impacts; set a walk-away floor for early-exit compensation equal to 9–12 months of Gucci gross profit plus inventory unwind.
Rationale: Quantified thresholds enable disciplined negotiation and protect balance sheet from a sudden $70m–$100m profit gap.
Role affected:Coty CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Reallocate 150–250 bps of Gucci A&P to Marc Jacobs, Burberry, and Boss in top 10 markets; secure Q1–Q2 2026 incremental end-caps and gift-with-purchase to defend shelf share.
Rationale: Mitigates potential mid-single-digit sell-out softness from litigation overhang and de-risks retailer rebalancing.
Role affected:Coty CMO
Urgency level:short-term
Establish a transition services agreement framework by Q2 with defined data-room protocols, regulatory dossier transfer milestones per market, and a capped early-termination consideration range.
Rationale: Reduces operational and legal uncertainty, enabling a 6–12 month acceleration of L’Oréal’s launch roadmap without IP leakage.
Role affected:Kering Chief Strategy Officer
Urgency level:short-term
Strategic Actions
Lock retailer capacity for 2028 H2 launch waves by pre-negotiating incremental shelf space and media weight, and begin parallel regulatory registrations in priority APAC markets under permissible clean-room processes.
Rationale: Secures first-mover retail advantages and compresses time-to-scale by 1–2 seasons post-handover.
Role affected:L’Oréal Luxe President
Urgency level:strategic
Risks & Opportunities
Primary Risks
- Extended litigation delays knowledge transfer and slows 2026–2027 NPD cadence, pressuring Gucci sell-out by 3–5%
- Retailers reallocate shelf space away from Gucci due to uncertainty, affecting Coty’s holiday and Spring resets
- Regulatory dossier and IP disputes cause gaps in market authorizations, risking out-of-stocks in China and travel retail
Primary Opportunities
- Negotiated early exit with compensation improves Coty’s cash and allows reinvestment into higher-growth franchises
- Kering and L’Oréal synchronize brand codes and media at scale, lifting Gucci Beauty’s ASP and mix by 2–3 pts post-2028
- Transition services agreement minimizes disruption, enabling an earlier wave of hero launches with stronger retailer backing