Marcolin SpA, Tom Ford’s long-term eyewear licensee, will spend $250 million to extend this arrangement, giving Tom Ford a total enterprise value of $2.8 billion.
For Estee Lauder, it is worth paying up.
It has had a beauty deal with Tom Ford for almost two decades. This is set to achieve annual net sales of $1 billion over the next couple of years. Tom Ford Beauty generated almost 25% net sales growth in the year to June 30. Acquiring the company secures this license beyond 2030, when it was due to expire. Estee will also have the benefit of cashflow from the brand, additional synergies and will no longer have to pay royalties to Tom Ford. Plus, there are opportunities to expand the line into other areas such as skincare.
Estee Lauder also appears to have solved the problem of dealing with Tom Ford’s non-beauty businesses: It has extended and expanded the scope of the long-term fashion licensing deal with US-listed Italian fashion company Ermenegildo Zegna NV.
But the US cosmetics giant still faces some complexities.
While it has buckets of beauty know-how, fashion isn’t its forte. Although long-term apparel and accessories licensee Zegna will operate this side of the business, and will acquire some of Tom Ford’s fashion assets to help it, the two companies will need to keep delivering Tom Ford’s trademark mini-dresses and killer heels to create a halo around the name. Keeping Tom Ford at the forefront of consumers’ minds is crucial to selling its $50 lipsticks and $100 fragrances.
Estee and Zegna have more heavy lifting to do, but if they can get it right, there are opportunities for expansion in womenswear and accessories.
Estee said it would work closely with Zegna “on the creative direction to continue building the luxury positioning of the brand.” It certainly needs to, given that the designer Tom Ford isn’t sticking around. Ford will remain “creative visionary” at his eponymous fashion house only until the end of 2023. Then Estee is on its own.
Unlike Kering, which is a master of recruiting and nurturing the right creative talent at its fashion houses, this is new territory for Estee, although it will be able to draw on Zegna’s skills in bringing in a new designer.
Tom Ford’s strength in high-end make-up and fragrances — which many consumers turn to in moments of economic uncertainty (see: the lipstick index) — made Estee the better owner. But the company has its work cut out to maintain the beauty of this deal.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.
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