In a significant move reflecting the ongoing consolidation in the luxury market, Tapestry, the fashion company that owns Coach and Kate Spade, has acquired Capri Holdings, the parent company of Versace and Michael Kors, for approximately $8.5 billion. Shareholders of Capri will receive $57 per share in cash, resulting in a combined revenue of $12 billion for the two conglomerates.
This partnership between two prominent American companies with renowned luxury brands is a strategic response to the current slowdown in discretionary spending among US consumers. As high-end retailers seek avenues for growth, Tapestry and Capri, which already include other prestigious brands like Jimmy Choo and Stuart Weitzman, will leverage their collaboration to expand their reach in different regions. Specifically, this acquisition will help Tapestry strengthen its presence in Europe, the Middle East, and Africa, while also granting Capri’s brands increased exposure in the Asian market.
The chief executives of both Tapestry and Capri emphasize that this union will bring their handbags, shoes, and apparel to a wider consumer base across 75 countries, while also enabling them to tap into additional resources. Furthermore, the merger presents an opportunity to enhance their direct-to-consumer business and generate savings of $200 million in operating and supply-chain costs within three years.
Joanne Crevoiserat, CEO of Tapestry, states that the consolidation “creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.” Similarly, John D. Idol, Capri’s CEO, believes that joining forces with Tapestry will provide them with greater resources and capabilities to accelerate global expansion while preserving their brands’ distinct identities.
While Tapestry’s stock experienced a 3 percent decline before the market opened on Thursday, Capri’s stock rose nearly 60 percent. The potential merger comes at a time when the luxury market is witnessing a slowdown, particularly in North America. According to Neil Saunders, managing director at GlobalData, this has prompted Tapestry and Capri to look towards international markets for growth. Joining together as a larger entity offers them a sense of security in pursuing bold international plans.
Additionally, analysts suggest that this deal will grant Tapestry more credibility in the luxury market. Craig Johnson, president of Customer Growth Partners, explains that Tapestry has long aspired to become a true “house of luxury” similar to European giants like Kering and LVMH. While Tapestry’s current brands are considered near-luxe rather than true luxury, the acquisition of Capri provides them with an entry point into the genuine luxury segment. Over time, Versace may become the crown jewel within their portfolio, despite Michael Kors currently being Capri’s largest brand.
In terms of financial performance, in the most recent quarter, Tapestry experienced a 13 percent increase in net sales, while Capri’s revenue declined by 10.5 percent. Tapestry is scheduled to report its quarterly and full-year earnings on August 17.
Overall, the acquisition of Capri by Tapestry represents a significant move in the luxury market, aiming to consolidate resources, expand reach, and drive growth amid shifting consumer spending patterns.
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