A STEP FORWARD
Michael Kors buys shoemaker Jimmy Choo, trying to rebuild its brand name and boost weak sales,
LONDON— In a bid to burnish its brand image, American bag and accessories maker Michael Kors is buying luxury shoemaker Jimmy Choo in a deal worth £896 million ($1.46 billion).
Jimmy Choo, which counts Jennifer Lopez, Duchess of Cambridge Kate Middleton and Beyoncé among its fans, has a high-level profile that tempted Michael Kors to pay a premium. Shareholders in Jimmy Choo will get £2.3 in cash for each share, about 36.5 per cent above the firm’s share price of £1.685 on April 21.
Michael Kors has struggled recently, announcing in May that it would close up to 125 stores due to weak sales.
It said that Jimmy Choo is “the ideal partner” and will have its online presence bolstered as a result of the deal. Jimmy Choo CEO Pierre Dennis and creative director Sandra Choi will remain in their jobs.
“Jimmy Choo is poised for meaningful growth in the future and we are committed to supporting the strong brand equity that Jimmy Choo has built,” said John Idol, CEO of Michael Kors.
Analysts from Jefferies said the deal could help Michael Kors rebuild its brand name, though that would happen in the longer-term and not have an immediate impact on the company’s stock.
“We believe the strategic steps Kors is making to elevate its own brand are working, and believe the addition of Jimmy Choo, an iconic premium luxury brand, should be beneficial,” the analysts said in a note to clients.
London-based Jimmy Choo rose to prominence in the late 1990s, boosted by high-profile devotees including the late Princess Diana and the fictional Carrie Bradshaw in television series Sex and the City.
The deal comes amid consolidation in the U.S. luxury industry, with Coach also agreeing to buy Kate Spade this year.
“Again, Michael Kors follows the path of Coach — and again, on steroids,” wrote Luca Solca, an analyst at Exane BNP Paribas. “After a meteoric rise and spectacular crash, it is now the time to recycle cash into other brands.” The company has been closing stores and reducing its exposure to department stores in an effort to boost its exclusivity. Alongside Ralph Lauren and Calvin Klein, Michael Kors has struggled to maintain its brand image after broadly distributing its products in discount stores and outlet malls. With files from Bloomberg
Deal comes amid consolidation in the U.S. luxury industry