Investors bag Kors on Versace rumors
This outfit looks a little flashy for Michael Kors.
Shares dropped Monday on reports that the US-based designer of affordable handbags is eyeing a $2.35 billion acquisition of Italian fashion house Gianni Versace.
Shares of Kors sank 8.2 percent, to $66.71, with some analysts fretting that Kors would be taking on more than it can handle.
It has been less than a year since Kors shelled out $1.2 billion to buy Jimmy Choo. Meanwhile, Kors still hasn’t recovered from a two-year sales slump when its handbags were slapped with deep discounts at department stores.
“Kors has not fully integrated the [Jimmy Choo] business,” Wells Fargo analyst Ike Boruchow wrote, adding that a Versace deal is “possibly doing too much too quickly.”
Others worry that the reported price tag for Versace looks rich. Versace, whose namesake designer was gunned down in 1997 by a serial killer, is a brand that “some perceive as past its peak,” said Craig Johnson, president of Customer Growth Partners.
Since its founder’s death, the label has been run by his sister, Donatella Versace, who along with family members owns 80 percent of the company. Donatella checked into drug rehab in 2004, tarnishing the company’s image.
While she has since recovered and still runs Versace, the company is only modestly profitable, generating about $18 million in profits on $822 million in sales last year.
Stephen Schwarzman’s Blackstone Group owns the remaining 20 percent and is reportedly looking to get out.
Michael Kors didn’t respond to a request for comment.