Modish Mini: Estée Lauder Buys Tom Ford for $2.8 Billion

What this means for the future of the beauty giant and the Tom Ford brand

Photo Credit: WSJ

Yesterday, Estée Lauder announced its acquisition of Tom Ford for $2.8 billion, edging out its luxury conglomerate competitor, Kering SA. Having no fashion labels within its massive portfolio, this buyout represents a massive shift for the skincare and cosmetics giant. So, how will this unlikely pairing affect the respective futures of these two renowned companies? Here’s what you need to know:

(1) Tom Ford will be the conglomerate’s first high fashion brand

Unlike luxury heavy-hitters like LVMH and Kering, whose vast portfolios are centered around their high fashion labels, Estée Lauder is solely a cosmetics conglomerate. Despite boasting some of the world’s most renowned beauty labels, from MAC to La Mer, Estée Lauder has no experience in managing a fashion label. However, while Kering or Richemont may have more experience in luxury management, Estée Lauder is well equipped financially to expand its portfolio’s horizons. With a market cap of $79.66 billion, Estée Lauder is bigger than both Kering and Richemont, whose market caps sit at $67.25 and $60.03 billion, respectively.

(2) The Tom Ford brand will remain the same, for now.

According to The Fashion Law, since 2006, Estée Lauder has been the sole licensee of Tom Ford beauty and fragrance, while Ermenegildo Zegna and Marcolin have been the sole licensees of Tom Ford ready-to-wear and eyewear, respectively. Estée Lauder is said to be maintaining these license relationships. Furthermore, Tom Ford is slated to stay on at least until the end of 2023, leaving Estée Lauder plenty of time to find a new creative director for its new acquisition.

(3) Tom Ford will be a publicly-held brand for the first time ever

Since its creation, Tom Ford has remained a privately-held company, with the brand’s namesake and creative director, Tom Ford, controlling 64% of the brand prior to its sale. This will undoubtedly prove challenging for Estée Lauder given that this will not only be the conglomerate’s first high fashion label in its portfolio, but the first high fashion label it will be taking public, too.

(4) Estée Lauder could make Tom Ford a global brand

Perhaps the only part of the deal that truly makes sense is the fact that both Tom Ford and Estée Lauder are American companies. However, with its strong foothold in the European market, Estée Lauder could help boost Tom Ford’s international notoriety and sales, transforming it from a niche, predominantly American luxury brand to an iconoclastic heritage house known the world over. According to the cosmetic powerhouse’s Q1 FY 2023 results, net sales for the period were $3.93 billion, with $1.68 billion coming from Europe, the Middle East, and Africa; $1.13 billion coming from Asia, and $1.12 billion coming from the Americas. With the majority of the groups sales coming from markets outside the US, Estée Lauder is well poised to launch Tom Ford worldwide.

I look forward to seeing what this strange but exciting pairing will do. Not only has Estée Lauder entered a new arena, but it has challenged the monopoly created by LVMH and Kering that has long kept industry outsiders from joining its elite ranks. Ultimately, Tom Ford’s cult following, chic modernism, and impeccable tailoring coupled with Estée Lauder’s loyal consumer base, solid financials, and expansive portfolio could be a match made in high fashion heaven.