Tom Ford return offers remedy for Gucci fatigue

MILAN, Nov 4 (Reuters Breakingviews) – Tom Ford’s return to the realm of Gucci owner Kering (PRTP.PA) would add some much-needed sparkle. The $60 billion luxury behemoth is in advanced talks to purchase the former Gucci star designer’s company, the Wall Street Journal reported on Thursday. A swoop on the high-end U.S. label would lower Kering’s dependence on its biggest but cooling brand. Bringing Tom Ford himself on board could even help revitalise it.

Tom Ford’s personal history is intertwined with Gucci. Promoted to chief designer in 1994, he turned the stylish Italian brand into a more sensual label liked by pop stars like Madonna and Jennifer Lopez. He stayed on when Francois Pinault took over Gucci in 1999 and helped revamp Kering’s Yves Saint Laurent label before leaving in 2004 to start his own fashion house.

Under Alessandro Michele, who became chief designer in 2015 and promoted a more casual style, Gucci enjoyed a massive expansion: its sales have nearly trebled to $10 billion since then. Yet the appeal among its fickle main cohort of young Chinese shoppers is wearing off: Gucci sales rose just 9% in the third quarter of this year, underperforming a 14% rise at the whole group. That’s a problem for Kering, which derived about half of its 17.7 billion euros of sales and three-quarters of its operating profit from Gucci in 2021. It also explains why Kering has underperformed rivals LVMH (LVMH.PA) and Hermès International (HRMS.PA) in the last three years.

Tom Ford offers diversification at a reasonable valuation. A $3 billion price tag, which beauty giant Estée Lauder (EL.N) reportedly offered in August, would value the U.S. brand at close to three times its estimated forward annual sales of about $1 billion, say JP Morgan analysts. That’s broadly in line with Kering’s valuation.

Using Kering’s vast retail network would also help Tom Ford scale up quickly. Sales of Tom Ford Beauty’s cosmetics and fragrances grew at a double digit rate in the third quarter, according to Vogue Business. But the U.S. brand’s ready to wear line is constrained by its limited retail presence, luxury insiders say. That could change if it joins the giant French conglomerate.

Should Ford join Kering in a creative function, his vast experience could breathe new life into Gucci at a critical juncture. From all perspectives, Tom Ford’s presence at Kering would be a welcome comeback.

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French luxury group Kering is in advanced talks to buy U.S. fashion brand Tom Ford, the Wall Street Journal reported on Nov. 3.

In August, the Wall Street Journal reported that beauty giant Estée Lauder was looking to buy Tom Ford for $3 billion.

Fashion designer Tom Ford, who founded the eponymous brand in 2005, became the creative director of Gucci in the mid-1990s and helped propel it to global luxury stardom.

Shares in Kering were up 3.5% at 486.40 euros by 0925 GMT on Nov. 4.

Editing by Aimee Donnellan and Oliver Taslic

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