When it comes to the pantheon of luxury conglomerates, Kering and LVMH reign supreme as they each hold a sizeable portion of the luxury fashion and goods market. Tapestry, the New-York based parent company of Coach, Stuart Weitzman and Kate Spade New York is now throwing its hat in the ring after making plans to buy Capri, the owner of founder-led labels which include Jimmy Choo, Michael Kors and Versace, at the end of last week.
There is a clear distinction between Tapestry which holds more American lifestyle-led (perhaps “affordable” luxury) brands that are youthful and modern as opposed LVMH’s European counterparts that hold internationally renowned powerhouses consisting of distinguished fashion maisons the likes of Louis Vuitton and Dior or Kering’s Gucci and Saint Laurent. Among other major factors, scale is part of Tapestry’s new strategy.
Reuters reports that luxury firms in the United States have “consistently lagged” behind their European peers in scale, limiting their ability to compete with LVMH for instance and their 75 brands. One could argue that the acquisition would bring in Versace and Jimmy Choo’s clientele of wealthy consumers alongside Michael Kors and Coach’s more younger customers.
As far as financial backing goes, Tapestry has secured US 8 Billion dollars from Morgan Stanley and the Bank of America. The merger will see the combined company become the fourth largest luxury company in the world with a combined market share of approximately “5.1 percent of the luxury goods market,” according to AP News with global annual sales of more than US 12 Billion, reaching more customers worldwide with a presence in more than 75 countries. As it stands, Tapestry has a market cap of approximately US 10 Billion dollars while Capri is nearly US 4 Billion dollars.
“The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house,” Tapestry CEO Joanne Crevoiserat said in a statement while Capri Chairman and CEO John Idol commented “By joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands.”
According to the terms of the all-cash agreement, Tapestry will pay Capri shareholders US 57 dollars per share. According to Reuters, the deal is expected to close in 2024 and is estimated to generate savings of more than US 200 Million dollars within three years of closing.
2023 continues to be the year of power moves in the luxury market as Kering bought a 30 percent stake in Valentino for 1.7 Billion Euros in July while LVMH is set to sponsor the 2024 Paris Olympics.
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