Michael Kors to buy Jimmy Choo in $1.2 billion deal
Michael Kors has picked out some new shoes to go with its handbags.
On Tuesday, Michael Kors Holdings of New York said it had agreed to buy shoe company Jimmy Choo of London for about $1.2 billion, the latest push by a U.S. high-end fashion house to find new sources of growth and what its chief executive characterized as the first step in building a bigger international luxury group.
Many upscale brands like Michael Kors have faced plummeting sales and tepid profits. Mall traffic in North America has declined sharply, while shoppers who have traditionally been loyal to the middle market have gravitated toward brands at extremes of the style and price spectrum.
Jimmy Choo, which shot to prominence thanks to celebrity patrons like Princess Diana and “Sex and the City” star Sarah Jessica Parker, could give Michael Kors a new avenue for growth.
“Acquiring Jimmy Choo is the beginning of a strategy that we have for building a luxury group that really is focused on international fashion brands,” John Idol, the chairman and chief executive officer of Michael Kors Holdings, said.
Though both Michael Kors and Jimmy Choo styles are red-carpet favorites, the brands appeal to different segments of the population.
Michael Kors, known for fashion-forward designs and competitive prices, is heavily reliant on outlets and department stores, where deep discounting is common. Leather purses sell for as little as $70 and handbags are available for $95.
Jimmy Choo products are more expensive. Open-toe slipon sandals sell for $425, while crystal-encrusted shoes with the brand’s signature sky-high stiletto heels go for nearly $3,000. The brand brings Michael Kors not only a different range of customers, but also hefty profit margins and an upmarket aura.
After the sale, Michael Kors said, Jimmy Choo will continue with its current management team, including Pierre Denis, the CEO, and Sandra Choi, Choo’s niece. The shoemaker has more than 150 stores globally, as well as a presence in many of the world’s top department stores.
Michael Kors said it expects to open more Jimmy Choo retail stores and expand its fashion offerings. It also plans to develop Jimmy Choo’s online presence, part of a broader push by brands to win over fickle shoppers and fend off the threat posed by Amazon. Idol said Michael Kors wants to increase Jimmy Choo’s sales to $1 billion annually.