Coach owner to buy parent of luxury brands in mega merger
Groups estimated to generate $12b
Tapestry, the fashion company that owns Coach and Kate Spade, said Thursday it had acquired Capri Holdings, the parent of Versace and Michael Kors, for about $8.5 billion in cash, as consolidation in the luxury market gathers pace.
The deal is a partnership of two large US companies with familiar luxury brands coming together as high-end retailers look for growth amid signs that US consumers are pulling back on discretionary spending. It also comes as the most dominant luxury players jostle to snap up brands and broaden their portfolios.
Combined, the two groups would generate about $12 billion in revenue, bringing brands such as Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors. Once the transaction is completed, they will operate under the name Tapestry.
The move is the boldest effort yet by American fashion executives to build a collective that might be able to compete with the might of European giants such as LVMH Moët Hennessy Louis Vuitton and Kering.
The CEOs of Tapestry and Capri stressed that the combination would bring their handbags, shoes, and apparel to a broader consumer base and allow them to tap into more resources. For Tapestry, the acquisition will help expand its reach in Europe, the Middle East, and Africa, while Capri’s brands will gain more exposure in Asia. The companies said the merger also presented an opportunity to increase their direct-to-consumer businesses and save $200 million in operating and supplychain costs within three years.
“It represents a very compelling financial opportunity,” Joanne Crevoiserat, CEO of Tapestry, said in an interview. “We’re finding with this combination an opportunity to deepen our engagement with luxury customers on the high end.”
On a call with investors Thursday, analysts focused their questions on how the two companies would integrate and the timeline for the cost savings that would result. Executives emphasized that pooling resources would allow their brands to share digital and marketing capabilities, transportation, and supply chains, which are often referred to as synergies.
“Synergies are always easier said than done, so this will clearly bear monitoring,” Simeon Siegel, a retail analyst at BMO Capital Markets, said in a note to clients. “But if there were ever two companies to enjoy synergies, Tapestry and Capri align.”
Tapestry’s stock fell nearly 16 percent Thursday, while Capri’s shares soared more than 55 percent.
The deal also gives Tapestry more cachet in the luxury market, analysts said.
“Tapestry has long-eyed becoming a bona fide ‘house of luxury’” similar to Kering and LVMH in Europe, said Craig Johnson, the president of the consultancy Customer Growth Partners. “But its current brands are near-luxe rather than true luxe. Capri gives Tapestry a toehold in the true luxe world, which even though Kors is by far Capri’s largest brand, over time Versace may well be the real ‘jewel in the crown.’”
Thursday’s deal was the latest in a string of mergers and acquisitions in the global luxury industry in recent months. This week, the upmarket Australian fashion house Zimmerman was bought by the private equity firm Advent in a deal worth $1 billion. Last month, Kering, which owns brands such as Gucci and Saint Laurent, said it would purchase a stake in Valentino, bringing another large fashion label under its tent.
And speculation continues to swirl around a possible sale of Bergdorf Goodman to LVMH, the world’s largest luxury group by sales. Bergdorf ’s Fifth Avenue department store is across the street from the glittering flagship boutique of Tiffany & Co., the jewelry house LVMH bought for $15.8 billion in 2021.