In the Luxury, Fashion & Retail industry, a bold vision of the future is reshaping business strategy as new prospects for recovery and reinvention arise. The fastest route to reinvention for many organizations is through acquisitions—quickly building up new customer bases, divesting to access liquidity, creating digital direct-to-consumer channels, and shifting the scope and scale of operations to satisfy changing consumer demands are top priorities.
The biggest luxury deal of 2022 reaffirms this rising trend, as Estee Lauder Companies (ELC) toppled rival Gucci-owner Kering in the race to acquire the Tom Ford brand. Valued at $2.8 billion by way of a combination of cash, debt, and $300 million in deferred payments, the NYSE-listed cosmetics company took over fellow Tom Ford’s and its thriving beauty, skincare, and fragrance arms.
Tom Ford’s distinctive vision of modern glamour has earned it a place among the most successful and coveted cosmetic brands in the world, delivering strong double-digit growth in net sales from fiscal years 2012 through 2022. In addition to securing long-term cash flow, ELC will benefit from the removal of costly royalty payments and the creation of new licensing revenue streams. Most importantly, these synergies offer innovative prospects for ELC's beauty-focused high-end products to expand online penetration while enhancing the speed and agility of delivery.
Moreover, the acquisition comes as no surprise as ELC has been a key shareholder and partner of Tom Ford for almost 15 years after launching the Tom Ford Beauty brand together in 2006. With Tom Ford fully integrated, ELC expects an additional $1 billion in annual revenue and to maintain strong momentum across channels and key markets such as China and the United States, where it consistently ranks in the Top 10 best-seller lists.
"As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty," Estée Lauder Companies CEO Fabrizio Freda mentioned after the deal announcement.
In our view, as a retailer of "non-essential" (luxury) goods, Estée Lauder makes the right move to speed up digitalization by acquiring Tom Ford due to the shifting consumer habits following the pandemic, as establishing broader online communities and platforms for loyalty programs has become essential for long-term growth in the space.
Written by: Ignacio Paz Garcia
Sources: The New York Times, CNN, Vogue, The Esteé Lauder Companies, El País
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