Coach’s parent company, Tapestry, is nearing a deal to acquire luxury fashion giant Capri Holdings, marking one of the biggest fashion tie-ups this year, according to the Wall Street Journal.
In a deal expected to be announced as soon as tomorrow, Tapestry will add Capri Holdings’ three luxury fashion labels – Michael Kors, Jimmy Choo and Versace – to its portfolio, where they will join Coach, Kate Spade New York and Stuart Weitzman.
“The potential acquisition of Capri Holdings by Tapestry would create an American fashion giant that, while not quite as prestigious or large as its European counterparts, would wield a significant influence in the luxury market,” said Neil Saunders, MD of GlobalData.
WSJ estimates Capri Holdings’ market value at $4 billion and Tapestry’s at around $10 billion.
Sauders said the potential acquisition comes at a time when luxury is facing something of a slowdown, especially in the North American market where consumers, even at the higher income end of the market, are starting to curtail spending.
“This has put pressure on Tapestry and Capri, both of which are now looking to international markets to bolster growth. There is more security in embarking on bold international plans as a larger entity.”
Sanders said while Versace and Jimmy Choo are both powerful additions that can be nurtured and swung into growth fairly easily, Michael Kors, the biggest part of Capri Holdings, is more problematic.
“Tapestry has plenty of experience of reviving problem brands from its turnaround of Coach, which had become ubiquitous and sullied through constant discounting and promotions. Kate Spade was also in a similar position when Tapestry acquired it and is now emerging in positive form from a successful reinvention.
“The same thinking can arguably be applied to Michael Kors, but the more complex nature of the brand will make any revival much more difficult and time-consuming.”
The luxury fashion industry has seen conglomerates striking deals in the past few weeks. Most recently, US private equity investor Advent International acquired a majority stake in luxury fashion label Zimmermann from Style Capital, following Kering Group’s acquisition of Valentino and Richemont’s acquisition of Gianvito Rossi last month.
