British luxury fashion brand, Burberry, has licensed its fragrances and cosmetics business to Coty, an expanding American cosmetics group. The company would hold the creative control over the brand including the faces of the commercial campaigns while letting Coty handle the global distribution.
According to Reuters, Burberry Chief Financial Officer Julie Brown said that the company had shifted the business by cutting secondary-channels sellings. Brown also admitted that the company can take advantage of Coty's expertise on working with luxury brands such as Gucci, Hugo Boss and Calvin Klein, and "their-first class distribution."
Coty is to pay £130 million pounds ($163 million) for the long-term global license and £50 million for other assets. Meanwhile, Burberry Beauty's revenue was £203 million in the 2015-2016 financial year with seven percent contribution to the company.
Edgar Huber, the president of Coty Luxury told that the luxury brand fits with Coty's portfolio along with other high-end beauty brands. "We are uniquely positioned to develop Burberry Beauty to the next level," Huber said, as reported by USA Today.
The deal is viewed as a right decision for the company to focus on the retail business by analysts, according to Financial Times. Helen Brand, an analyst at UBS saw it as a solution as the beauty business at Burberry had been underperforming.
Burberry took back the license to the fragrance division back in 2013 with £144 million. However, "a license income of £25 million to £30 million previously has fallen to less than £10 million of earnings" and it was not a good thing.
The luxury fashion company undertook to relaunch its cosmetics division with an advertising campaign featuring Iris Law, a model and a daughter of actor Jude Law. Burberry said that the company expected the cosmetics sales to rise to fifteen percent from the current eight percent revenue.
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