Beauty group Puig says potential IPO would bring ‘discipline’

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Puig, the deal-hungry beauty group that owns the brands Paco Rabanne and Charlotte Tilbury, says a stock listing would impose market “discipline” without relinquishing the founding family’s control as it considers a multibillion-euro share sale.

Marc Puig, the chair who is the third generation of his family to lead the Spanish perfume and make-up group, told the Financial Times an initial public offering was one of several options under review to bring new investors to the company, which bankers value at €8-10bn.

The flotation of Puig, which bills itself as an “affordable luxury” player, would be the biggest in the sector since Ermenegildo Zegna in 2021 and follow in the footsteps of rivals such as LVMH, Kering, L’Oréal and Estée Lauder, whose founders have gone on to list shares.

Despite a global slowdown in luxury spending, Puig — grandson of the company founder, chief executive since 2004 and chair since 2007 — said his business was on track to record more than €4bn in sales this year, putting it ahead of schedule in its plan to reach €4.5bn by 2025.

Name-checking listed peers including Hermès and Prada, Puig said they showed that continued success depended on founding families remaining in control. But family-owned businesses faced “traps” that outside investors and external scrutiny could help them avoid, he said.

“Difficulties can arise, especially in the transition between generations — the search for leadership, a lack of understanding, a loss of passion,” he said. “Having to be accountable to the market brings a discipline and rigour that ensures those issues don’t arise.”

“Sometimes family businesses can lose their position in the market. They can start to die slowly and nobody inside the company is aware of it,” he added. “If you’re accountable [to investors] those things can be noticed.”

Puig, whose Catalan name is pronounced “poodge”, has acquired 10 brands in the past 12 years, broadening its range to include everything from Charlotte Tilbury eye shadow to Jean Paul Gaultier high heels.

It has accumulated a significant amount of debt in the process, but the chair said this did not limit its firepower and that raising capital from outside investors was not a precondition for doing more deals.

“We manage the business with prudence from a financial point of view, so there is less flexibility today than we might have had a year or two ago. But we are still looking at things,” he said. “In our sector when you have strong and healthy brands, as we do, you have a high ebitda margin, you have a lot of cash and relatively small capital expenditure.”

The group’s debt load at the end of last year was equal to 1.6 times its 2022 earnings before interest, tax, depreciation and amortisation, which stood at €638mn.

Puig, which is still based in Barcelona where it was founded in 1914, expanded in the last century as manufacturer of fragrances under license for other brands such as Paco Rabanne and Carolina Herrera.

But it has changed tack under the leadership of Marc Puig, using acquisitions to accumulate a portfolio of its own brands — which now account for more than 90 per cent of all sales — and expand in fashion, make-up and skincare.

On the possible initial public offering, he stressed that the company was “still in the reflection phase” and that no decision had been made.

“One option would be to open up the capital and opening the capital could mean a private equity shareholder, it could mean a much longer-term shareholder, or it could mean the market,” he said. Maintaining the status quo was also possible.

He said the company would implement any changes “within the next few years” but was in no rush. Asked whether the process was related to any plans he might have to step down he said no. “I still consider myself to be quite young.”

Earlier this month LVMH, which is valued at more than €330bn, signalled an end to the post-pandemic luxury boom when it reported slowing sales growth.

Puig said: “We are more in ‘affordable luxury’ rather than luxury because the beauty segment has a much lower unit price . . . We have traditionally been a bit more immune to these slowdowns.”

But he added: “The biggest challenge we have is how to continue to attract, retain and motivate talent and [maintain] creativity and imagination in our business when we compete with big companies that are all number one in the world in something, while in our case people hardly know how to pronounce the name.”

Additional reporting by Adrienne Klasa in Paris and Arash Massoudi in London