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Coach and Michael Kors Parent Companies’ Merger Challenged
April 23, 2024
The Federal Trade Commission (FTC) is opposing the $8.5 billion merger between Tapestry and Capri, the parent companies behind brands like Coach, Kate Spade, Michael Kors, and Versace. This move is unusual for the FTC, which rarely steps in on fashion industry deals due to its competitive nature.
The FTC’s main concerns revolve around “accessible luxury” items, referring to the more affordable products from brands like Coach and Michael Kors. They fear that consumers might end up paying more, as the merged company may not feel the need to compete in pricing.
For instance, a Michael Kors Marilyn medium logo tote bag is priced at $228, while a similar Coach Willow tote bag from Tapestry costs $350. The FTC argues that this merger could limit competition, making such products more expensive for consumers.
While the European Union and Japan have given their approval, the FTC’s scrutiny has cast doubt on the deal. Shares of Capri have dropped by 25% this year, while Tapestry’s shares rose by 6%.
Despite the FTC’s opposition, both companies remain determined to proceed with the merger. They believe the merger will create an American luxury giant capable of competing with European powerhouses like LVMH and Kering. However, even combined, the two companies would still lag far behind these European giants in terms of revenue.
Both Capri and Tapestry reported mixed financial performances recently. Capri’s quarterly revenue fell by 5.6%, while Tapestry recorded record revenue following a strong holiday season.
The FTC’s challenge to the Tapestry-Capri merger highlights the agency’s commitment to maintaining fair competition across industries. The outcome of this dispute will have significant implications for the future of the fashion industry, consumer pricing, and the broader landscape of luxury retail. Consumers and industry stakeholders alike will be watching closely as this high-profile case unfolds, shaping the direction of the luxury market in the years to come.
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