Big bang in the world of luxury in the United States. Tapestry, the owner of the Coach brand, is set to acquire Capri, the parent company of Michael Kors, Versace and Jimmy Choo, for $8.5 billion. After long months of discussions, a definitive agreement has just been signed between the two luxury groups.
The acquisition of Capri by Tapestry, which remains subject to obtaining the green light from Capri shareholders and regulatory authorities, is expected to be finalized in the course of 2024.
This acquisition will give birth to a group whose turnover will reach 12 billion dollars, operating income nearly 2 billion dollars, and whose geographical footprint will extend over 75 countries. “The combination of Coach, Kate Spade, and Stuart Weitzman with Versace, Jimmy Choo and Michael Kors creates a powerful new global luxury house, offering a unique opportunity to deliver greater value to our customers,” Joanne said. Crevoiserat, the boss of Tapestry.
The combination of Capri and Tapestry is expected to generate $200 million in cost synergies. The two companies are also geographically complementary. Thanks to this acquisition, Tapestry acquires above all the critical size to hope to compete with the European luxury giants. For a long time, the Americans in the sector paled in comparison to LVMH (79 billion euros in turnover in 2022), Kering (20 billion euros in turnover), Chanel (16 billion) or Hermès (11 billion). LVMH alone owns 75 brands, including Louis Vuitton and Dior.
And these players, powerful on the American market, have continued to grow stronger through acquisitions. Kering again announced on July 27 that it would take a 30% stake in the capital of the Italian Valentino, and has a purchase option to acquire all of it no later than 2028. In 2021 especially, LVMH bought the American jeweler Tiffany for 15.8 billion dollars, after an epic battle.
According to Neil Saunders, director at GlobalData quoted by AFP, Tapestry and Capri combined should hold 5.1% of the luxury market share, and rise to fourth place among global groups behind LVMH, Kering and Chanel.
While the luxury market is running out of steam in the United States, the takeover of Capri by Tapestry is also part of the counter-attack. From January to March, Capri sales fell 10.5%. The London-based group posted a net loss of $34 million. Its strategy of democratizing the products of its brands has been criticized.
But the Capri CEO mostly blamed the US economy. “We recognize that there are near-term uncertainties in the US market, but strong growth in Asia and stable demand in Europe are encouraging,” he commented. According to Bain, the growth of the global luxury market should fall from 15% in 2022 to a range between 5% and 12% in 2023. The American market is particularly affected by the economic situation.
Together, Tapestry and Capri will therefore be stronger to develop their six brands outside their home market. The CEO of Capri underlined this when announcing the definitive agreement between the two groups: “ We will have greater resources and capacities to accelerate our internationalization while preserving the unique DNA of our brands. »
Tapestry is not its first acquisition. Then known as Coach, the American group bought the leather goods maker Kate Spade in 2017 for 2.4 billion dollars. Capri had done the same on its side, taking over the shoemaker Jimmy Choo for 1.2 billion dollars.
