Why Every Fashion House is Launching Beauty
Fashion houses keep launching beauty lines because a $4,000 dress builds desire and a $45 lipstick converts it. The math behind the pattern.
In 2020, Hermès did something that would have seemed absurd a decade earlier. The company that built its reputation on $10,000 handbags and two-year waitlists launched a lipstick. A full beauty line: 24 shades of Rouge Hermès at $67 each, designed by their shoe designer Pierre Hardy, produced in their own workshops in Normandy. By 2023, the beauty division was bringing in $528 million a year.
Since then, the pace has only accelerated. Prada launched makeup through L’Oréal in 2023, Balmain debuted fragrances through Estée Lauder in 2024, and that same year Celine (owned by LVMH) released its first lipstick. Dolce & Gabbana, after cycling through four different beauty licensees over three decades, finally pulled the whole operation in-house in 2023, projecting $1.5 billion in beauty revenue. The question stopped being whether a fashion house should have a beauty line and became how quickly it could launch one.
The reason is in the margins.
Why the math always wins
The average lipstick costs about $0.50 in raw ingredients and sells for about $20. A luxury perfume that costs $20 to produce can retail for $180. These are gross margins of 50-80%, and they hold across almost every beauty category.
Fashion margins look similar on paper, with ready-to-wear collections running 40-60% gross, but the resemblance ends there. Runway shows, fabric sourcing, small production runs, unsold inventory, and markdowns eat through that margin fast, and the operating number often collapses into the single digits or goes negative. Victoria Beckham’s fashion label lost money for 15 consecutive years, accumulating more than £66 million in losses before beauty turned the business around. That story is common. Fashion houses routinely subsidize their clothing lines with revenue from somewhere else, and increasingly, that somewhere else is beauty.
The reason is partly math and partly behavior. A woman who buys a $4,000 dress wears it a handful of times. A woman who buys a $45 lipstick finishes it in a few months and buys it again. Beauty products are small, light, consumable, and replenishable, which means recurring revenue at high margins, which is the opposite of fashion’s seasonal, hit-driven model.
At the top of the industry, the numbers are staggering. Chanel generated roughly $7 billion from beauty and fragrance in 2023, about one-third of its total $19.7 billion in revenue. LVMH’s perfumes and cosmetics segment brought in 8.4 billion euros in 2024. And Armani Beauty, which has been licensed to L’Oréal since 1988, generates an estimated 1.5 billion euros in annual revenue, with the royalties from that single license accounting for the bulk of the Armani Group’s entire EBITDA. The fashion business is the billboard. The beauty business is the company.
The licensing trap
Every fashion house entering beauty faces the same fork: hand the business to someone who already knows how to make and sell cosmetics, or build the operation yourself.
Licensing means signing a deal with a beauty conglomerate like L’Oréal, Estée Lauder, or Coty, which handles everything from formulas to retail to marketing while the fashion house collects a royalty of 5-15% of revenue. If a licensed beauty line generates $1 billion, the fashion house sees $50-150 million without touching a lab. The tradeoff is that the company actually making the product captures the rest, and when a beauty line gets big enough, the licensee starts to hold more power than the brand. Tom Ford’s beauty line, licensed to Estée Lauder since 2006, grew so valuable that in 2023 Estée Lauder bought the entire brand outright for $2.8 billion to stop paying an estimated $60-70 million a year in royalties, because the beauty business had become worth more than the fashion house that created it.
Building in-house means keeping 100% of the revenue but learning a completely different business. Chanel and Hermès have done it successfully, but both had decades to build that expertise. Victoria Beckham Beauty launched in-house in 2019, lost money for four straight years, then hit £112.7 million in combined revenue by 2024 with Rothschild hired to explore a potential $700 million sale.
The full lineup
Nearly every major fashion house now has a beauty operation. Some built it themselves, most handed it to one of four conglomerates: L’Oréal, Estée Lauder, Coty, or Puig.
In-house
| House | Launched | Scope |
|---|---|---|
| Chanel | 1924 | Makeup, skincare, fragrance |
| Dior | 1947 | Makeup, skincare, fragrance |
| Guerlain | 1828 | Makeup, skincare, fragrance |
| Givenchy | 1957 | Makeup, skincare, fragrance |
| Hermès | 2020 | Makeup, skincare, fragrance |
| Louis Vuitton | 2025 | Makeup, skincare, fragrance |
| Celine | 2024 | Makeup, fragrance |
| Dolce & Gabbana | 2022 (in-house) | Makeup, skincare, fragrance |
| Victoria Beckham | 2019 | Makeup, skincare, fragrance |
| Zara | 2021 | Makeup, fragrance |
| Fendi | 2024 (relaunch) | Fragrance |
| The Row | 2021 | Fragrance |
Licensed to L’Oréal
| House | Launched | Scope |
|---|---|---|
| YSL | 1964 | Makeup, skincare, fragrance |
| Giorgio Armani | 1988 | Makeup, skincare, fragrance |
| Ralph Lauren | 1978 | Fragrance |
| Prada | 2004 | Makeup, skincare, fragrance |
| Valentino | 2021 | Makeup, fragrance |
| Gucci | Transfers ~2028 | Makeup, fragrance |
| Bottega Veneta | 2011 | Fragrance |
| Balenciaga | — | Fragrance |
Licensed to Coty
| House | Launched | Scope |
|---|---|---|
| Burberry | 2017 (Coty era) | Makeup, fragrance |
| Hugo Boss | 1985 | Fragrance |
| Calvin Klein | 1981 | Fragrance |
| Marc Jacobs | 2001 | Fragrance |
| Chloé | 1975 | Fragrance |
Licensed to Puig
| House | Launched | Scope |
|---|---|---|
| Carolina Herrera | 1988 | Fragrance |
| Paco Rabanne | 1969 | Fragrance |
| Jean Paul Gaultier | 1993 | Fragrance |
| Dries Van Noten | 2022 | Makeup, fragrance |
| Christian Louboutin | 2014 | Makeup, fragrance |
Licensed to other partners
| House | Launched | Partner | Scope |
|---|---|---|---|
| Versace | 1981 | EuroItalia | Fragrance |
| Michael Kors | 2003 | EuroItalia | Fragrance |
| Jimmy Choo | 2011 | Interparfums | Fragrance |
| Coach | 2007 | Interparfums | Fragrance |
| Oscar de la Renta | 1977 | Interparfums | Fragrance |
| Salvatore Ferragamo | 2001 | Interparfums | Fragrance |
| Donna Karan/DKNY | 1992 | Interparfums | Fragrance |
| Moncler | 2021 | Interparfums | Fragrance |
| Tom Ford | 2006 | Estée Lauder | Makeup, skincare, fragrance |
| Balmain | 2024 | Estée Lauder | Fragrance |
The ones that got it wrong
Burberry is the cautionary tale everyone in the industry knows. In 2012, the brand paid approximately 181 million euros to buy back its beauty license from InterParfums, convinced it could do better in-house. By 2016, beauty revenue had dropped 17% and UK points of sale had collapsed from 3,000 to 35. Four years after bringing beauty in-house, Burberry handed it right back to a licensee, signing a deal with Coty in 2017. The company that makes $2,000 trench coats couldn’t figure out how to sell $35 lipstick.
Kering made an even more expensive version of the same mistake. The parent company of Gucci, Balenciaga, and Bottega Veneta created Kering Beauté in 2023 and immediately acquired the fragrance house Creed for 3.5 billion euros. They launched Bottega Veneta fragrance at $450 a bottle and Balenciaga at $320, positioning at the extreme high end. The division reported a 60-million-euro operating loss in the first half of 2025, and by October, Kering sold the entire beauty operation to L’Oréal for 4 billion euros. Three and a half billion to buy Creed, billions more to build the infrastructure, and two years later the whole thing went to the company they could have just licensed to from the start.
The pattern in these failures is always the same: fashion companies underestimate how different beauty operations are from fashion. Formulation, regulatory compliance, retail distribution at scale, replenishment logistics, beauty-specific marketing. These are specialized functions that require specialized teams, and brand equity alone doesn’t build any of them.
What separates the ones that work
The fashion houses that succeed in beauty either have genuine operational expertise built up over decades, like Chanel, or they have the discipline to partner with someone who does, like Armani with L’Oréal. The ones in between, famous enough to assume the brand will carry the product but too new to beauty to execute at scale, are the ones that burn through hundreds of millions learning what L’Oréal already knows.
Hermès understood this intuitively. When they launched Rouge Hermès, the $67 refillable lipstick was designed to the same material standards as a Birkin bag and manufactured in the same tradition as their leather goods. The beauty line doesn’t dilute the brand because it was built with the same obsessive attention to craft that defines everything else Hermès makes. They didn’t outsource the quality and hope the logo would compensate.
Victoria Beckham took a different but equally deliberate path: start narrow, absorb the losses, and expand only when the operation can support it. Eye makeup first, then skincare through a co-development deal with Augustinus Bader that let the brand borrow formulation expertise it didn’t have, then fragrance. The patience cost four years of losses. It also built a beauty business worth potentially $700 million.
The lesson that keeps repeating across all of these stories is that a brand built on $4,000 dresses and runway shows creates a kind of cultural desire that’s almost impossible to manufacture from scratch. A $45 lipstick converts that desire into recurring, high-margin revenue that funds everything else. The dress is marketing. The lipstick is the business. But only if the lipstick is actually good, and only if someone who knows how to make and sell lipstick is running that side of the house.
Frequently Asked Questions
Why do fashion brands launch beauty lines?
Beauty products carry gross margins of 50-80%, far higher than fashion’s typical 40-60% (which often falls further after markdowns and unsold inventory). Beauty products are also consumable and replenishable, creating recurring revenue that fashion’s seasonal model does not.
What percentage of luxury fashion revenue comes from beauty?
It varies by house. Chanel’s beauty and fragrance division accounts for roughly one-third of total revenue. LVMH’s perfumes and cosmetics segment generated 8.4 billion euros in 2024, about 10% of group revenue (though LVMH also captures beauty sales through Sephora in its selective retailing division). For many fashion houses, the beauty operation is the most profitable part of the business.
What is the difference between licensing and in-house beauty?
Licensing means a fashion house lets a beauty conglomerate (L’Oréal, Estée Lauder, Coty) develop, manufacture, and sell beauty products under its name in exchange for royalties, typically 5-15% of net revenue. In-house means the fashion house builds and runs the beauty operation itself, capturing all revenue but bearing all costs and operational risk.
Which fashion beauty lines have failed?
Burberry brought beauty in-house in 2013 and re-licensed it to Coty just four years later after a 17% revenue decline. Kering Beauté launched in 2023 with a 3.5-billion-euro Creed acquisition and sold the entire division to L’Oréal two years later after a 60-million-euro operating loss. Marc Jacobs Beauty was discontinued in 2021 before relaunching under a Coty license.
Sources
- Carrara Advisory, “In-House vs. Licensing: Why Luxury Fashion Houses Struggle with Beauty”. Comprehensive comparison of in-house and licensed models across Kering, Hermès, D&G, Burberry, Chanel, Ferragamo.
- LVMH, “LVMH Achieves a Solid Performance,” 2024 annual results. Perfumes and cosmetics segment revenue.
- Beauty Packaging, “Chanel” company profile. Chanel beauty revenue estimates, total revenue breakdown.
- L’Oréal Finance, “L’Oréal and Armani Renew Their Partnership in Beauty”. Armani license renewal, revenue estimates.
- Retail Dive, “Estee Lauder Acquires Tom Ford,” November 2022. $2.8B acquisition, royalty elimination rationale.
- Cosmetics Design Europe, “Hermès Lipstick Launch,” March 2020. Launch details, pricing, distribution.
- Fashionista, “Coty Burberry Beauty License,” April 2017. Burberry’s in-house failure and return to licensing.
- CosmeticsBusiness, “Kering Beauté Nets Kering $323 Million in 2024”. Kering Beauté revenue, operating loss, sale to L’Oréal.
- Glossy, “Dolce & Gabbana Beauty CEO,” 2024. D&G in-house beauty transition, revenue projections.
- Racked, “How Much Beauty Products Actually Cost to Make,” 2018. Lipstick production cost data.
- Coresight Research, “Beauty and Fragrance as an Entry Point to Luxury”. Beauty as accessible luxury entry point, discovery touchpoints.
- WWD, “Victoria Beckham Brand Revenue Hits $150M Mark in 2024”. VB revenue, beauty division contribution.