af-ford-able luxury

Estée Lauder expands its luxury footprint with Tom Ford’s blockbuster acquisition

Apparel and eyewear are new to the American cosmetics brand
Done here in another year?
Done here in another year?
Photo: Theo Wargo (Getty Images)
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Estée Lauder is buying Tom Ford’s brand—beauty, apparel, eyewear; all of it.

The New York-based cosmetics company, which introduced Tom Ford Beauty over 16 years ago, will stay in charge of the skincare, makeup, and fragrance lines, it said in a Nov. 15 press release.

Apparel and eyewear are instead new to Estée Lauder, but they’re staying in familiar hands. The non-beauty arms are retaining their experienced stewards: Ermenegildo Zegna, which has held a license to produce and distribute Tom Ford men’s wear since 2006, will now become Estée Lauder’s sole licensee for Tom Ford men’s and women’s wear, as well as accessories, jewelry, children’s wear and homewares. Italian company Marcolin, which has held the license for Tom Ford eyewear since 2005, will continue to do so.

For the deal valued at nearly $2.8 billion, the New York-based cosmetics company is paying $2.3 billion. Another $250 million will come from Marcolin at closing, which is expected to happen in the first half of 2023 subject to regulatory approvals.

Two major faces of the brand—founder and CEO Tom Ford himself and Domenico De Sole, chairman of Tom Ford International—will continue in their roles until the end of 2023.

The Tom Ford draw, in Estée Lauder CEO’s words

“As an owned brand, this strategic acquisition will unlock new opportunities and fortify our growth plans for Tom Ford Beauty. It will also further help to propel our momentum in the promising category of luxury beauty for the long-term, while reaffirming our commitment to being the leading pure player in global prestige beauty.”Fabrizio Freda, President and CEO of Estée Lauder

Estée Lauder and Tom Ford, by the digits

$1.2 billion: newly minted billionaire Ford’s net worth after the deal

25%: Tom Ford Beauty net sales growth in the fiscal year ended June 30 compared to the prior year.

$25 million: Tom Ford’s limited-edition fragrance drop in 2017 called “Fucking Fabulous” amassed 50 times higher revenue than the projected $500,0000. The fragrance then became a permanent part of the collection.

150+: number of countries Estée lauder sells its skin care, makeup, fragrance, and hair care products under nearly two dozen brand names including Estée Lauder, Clinique, Bobbi Brown, Le Labo, and others.

$1 billion: how much Estée Lauder expects Tom Ford Beauty to earn in annual net sales the next few years

Tom Ford is the brand

Leaving a namesake brand hasn’t always panned out well. Rebecca Taylor left her post as creative director in her namesake company in 2019, and earlier this year, its owner Vince shut the brand down. Years after Calvin Klein sold his company in 2002, the company has pared down ambitions, closing its ready-to-wear and luxury lines.

But the threat of winding down is small. Ford’s business should only grow, considering Estée Lauder has held its hand since the start. And a celebrity in his own right, Ford is staying at the helm for another year.

“But if Mr. Ford were to leave after next year, whether the business can stay as buzzy without the man himself as the wizard behind the curtain is another question,” a New York Times article asks.

Ford, 61, has donned many hats throughout his long and diverse career and become a household name in the process. He broke onto the scene as the designer who reinvented Gucci, where he met De Sole. During his stint at the fashion house, he also briefly led Yves Saint Laurent. Moving away from fashion, he debuted the eponymous fragrance Tom Ford in 2005. He was also the chairman of the Council of Fashion Designers of America for three years, before stepping down in May. Separately, he launched a second career in Hollywood as writer and director for movies like A Single Man (2009) and Nocturnal Animals (2016).

While Ford may do just fine without his brand, whether or not buyers and investors can detach the brand from him remain to be seen.

Bobbi Brown, who sold her brand to Estée Lauder two decades ago and walked away from it in 2016, says she’s still regularly stopped by shoppers, asking her to change or add products. Founders bring emotional investment and creative élan to self-named companies that many corporate acquirers struggle to recreate, she says. (Bobbi Brown is doing just fine under Estée Lauder, clocking double digit growth in net sales still.)

Rabbit hole: Tom Ford’s “Fragrance Index” advantage

“Lipstick index” was a term coined in 2001 (after the dot-com bubble burst) by then Estée Lauder chairman Leonard Lauder in reference to the influx of makeup sales during the recession. The economic indicator was a contrarian signal: when people cut back on discretionary spending on expensive items like apparel and jewelry, they spent on “affordable luxury” like makeup.

Today, as consumers are faced with sky-high inflation and cost-of-living crisis, there’s a case to be made for a “fragrance index.”

Perfumes were a bright spot in the middle of the pandemic, where people have sought out the small “affordable luxury” and showed a growing willingness to purchase it online. Even with fears of recession now, luxury perfume sales keep rising.

In the three months ended Sept. 30, 2022, Estée Lauder’s net sales fell 11% year-over-year, largely owing to China’s zero-Covid policy, inflationary pressures, and a strong US dollar. But even in a bleaker earnings report, organic net sales in fragrance grew double digits.

Tom Ford’s fragrances, which routinely make the best perfumes list for men and women, have been propping up the multinational company’s revenues. In last quarter’s earnings, “​​Tom Ford Beauty net sales grew strong double digits, powered by launches, such as Noir Extreme Parfum and Ebene Fume, as well as organic growth in existing hero franchises like Oud Wood and Ombre Leather,” Estée Lauder noted.

Plus, it won’t have to make royalty payments on Tom Ford’s beauty arm once the deal goes through.

One more thing: Is Balmain Estée Lauder’s next Tom Ford?

Estée Lauder is partnering with Balmain to launch a beauty brand in mid-2024. The beauty giant will manufacture, market and distribute makeup and other products for the French fashion house.

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