If the Choo fits . . .

e:

Jimmy Choo has found a new owner. Again. It’s the fifth time the London Stock Exchange-listed luxury shoe brand has changed hands since it was founded in 1996 by a Malaysian cobbler and a Vogue accessories editor.

JAB Holdings, the investment arm of Germany’s buttoned-up billionaire Reimann family, has sold the brand to Michael Kors for Us$1.4bn. That’s equal to about 17.5 times Jimmy Choo’s adjusted earnings before interest, tax, depreciation and amortisation for 2016.

The firm (Jimmy Choo, that is) has a market cap of just under £890m. And now is a good time to sell. The shoemaker reported solid annual numbers earlier this year as a result of growth in Asia and a weak pound. Its share price has rebounded to trade at about 195p. Before this, it largely drifted around its floating price of 140p.

The deal comes three months after JAB put Jimmy Choo up for sale. It has also hired Bank of America Merrill Lynch and Citi to look for a buyer for luxury footwear and accessories company Bally.

The Reimanns are shifting their portfolio from luxury to consumer comforts of a different, but no less esteemed, type: bread, doughnuts and coffee. They own stakes in Krispy Kreme, bakery chain Panera Bread and coffee maker Jacobs Douwe Egberts. They’re also in the personal care market through Coty, whose stable includes nail varnish kingpins OPI and Sally Hansen, and Durex and That Michael Kors is now the owner of Jimmy Choo could mean the brand is headed downmarket. The firm is an evangelist of “accessible” luxury fashion — to its own detriment, as overexposure rarely makes for good fashion. The ubiquity of its bags, watches and purses has meant that the brand has become rather devalued.

Michael Kors’ share price has lost one-fifth of its value this year, sales have stalled and forecasts have been downgraded as the mistake of chasing volume by opening too many shops has finally caught up. Now, the plan is to shut 125 of its 960 stores.

Deutsche Bank downgraded Michael Kors in May, citing market oversaturation. The research firm offered a “hold” rating, with a lowered price target of $40.

Before that, Piper Jaffray cut Michael Kors’ price target to $48 from $60, downgrading it to “neutral” from “overweight”.

Synergy-wise there’s the chance to cut costs by combining back-end functions such as buying and logistics (Jimmy Choo has in recent years moved into the accessories category).

What Michael Kors wants is to double Jimmy Choo’s annual sales to $1bn, but it has failed to find the delicate balance between hard-to-get and too accessible. For this deal to work, Michael Kors needs Jimmy Choo’s high-end customers. This means maintaining the (high-margin) reputation of Jimmy Choo and its appeal. It does not mean mass store openings in regional shopping centres and lower price points.

It’s supply and demand 101: you can have too much of a good thing.