Coach owner's Michael Kors deal creates US giant to take on European luxury rivals

 Coach owner Michael Kors deal creates US giant to take on European luxury rivals

-Training parent Tapestry will buy Michael Kors owner Capri Holdings in an $8.5 billion deal, creating an American fashion powerhouse that will challenge bigger European rivals for a bigger share of the global luxury goods market.

American luxury firms have consistently lagged behind their European counterparts in terms of scale, limiting their ability to better compete. Paris-listed LVMH owns 75 brands, including American jeweler Tiffany and fashion brands Louis Vuitton and Dior.Thursday's offering will also bring more affordable luxury brands Tapestry Kate Spade, Stuart Weitzman and Capri brands Jimmy Choo and Versace under one roof.

"Scale seems to be increasingly important in luxury given the resources large conglomerates can put into growing their smaller brands," said Morningstar analyst Jelena Sokolova.The combined company generated more than $12 billion in global annual revenue in the previous fiscal year, Tapestry said. That compares with roughly $87 billion for LVMH last year and roughly $23 billion for another European rival, Kering.

Tapestry will pay Capri shareholders $57 per share in cash, representing a premium of nearly 65%. The equity value of the transaction is $6.69 billion, according to Reuters calculations. Shares of Capri rose to $54.12 in afternoon trading Thursday afternoon, while Tapestry fell 14% as investors balked at the company's $8 billion bridging loan for the deal.The acquisition also hedges them against a looming slowdown in demand for luxury goods in the US as sticky inflation forces shoppers to cut back on spending.

"(Weakening demand) has put pressure on Tapestry and Capri, which are now looking to international markets to fuel growth. There is more certainty in launching bold international plans as a whole," said GlobalData CEO Neil Saunders.The deal will help Capri revive its Michael Kors brand under "better management" at Tapestry after weak sales in the past few quarters, analysts said.

Both companies grew through acquisitions.

In 2017, Tapestry - then known as Coach - was bought by handbag maker Kate Spade for $2.4 billion. In the same year, Capri, formerly known as Michael Kors, acquired British shoemaker Jimmy Choo for $1.2 billion.

A year later, Capri was bought by Versace for $2.2 billion.

"We are expanding and diversifying our customer base ... which deepens our access to luxury consumers and market segments," Tapestry CEO Joanne Crevoiserat said on a conference call about the deal.The acquisition of Capri could also mark a resurgence in deal-making in the US luxury space, while European majors have acquired high-end brands.

Last month, Gucci owner Kering said it was buying a 30% stake in Italian fashion brand Valentino. LVMH closed its acquisition of Tiffany for $15.8 billion in early 2021.The deal, which should be immediately accretive to Tapestry's adjusted earnings, is expected to close in 2024.

The transaction is estimated to generate more than $200 million in savings within three years of closing, the companies said.Reporting by Aishwarya Venugopal, Savyata Mishra, Deborah Sophia and Chandni Shah in Bengaluru; Editing by Sonia Cheema and Sriraj Kalluvila

The recent acquisition of Coach owner Michael Kors has taken the luxury fashion world by storm, creating a formidable US-based contender poised to compete with its European luxury counterparts. This strategic move is game-changing and positions the newly merged entity as a force to be reckoned with in the global luxury goods market. Let's dive into the details of this landmark deal and explore how it's poised to reshape the luxury landscape.

A bold move by Michael Kors:

The acquisition marks a bold move for Michael Kors, known for its iconic designs and high-end accessories. By expanding its portfolio through this deal, the brand is poised to gain a stronger position in the luxury sector, enabling it to compete more effectively on a global scale.

The Making of an American Giant:

The merger of Coach and Michael Kors under the same umbrella creates an American luxury giant with a wide range of products and a significant market presence. The merger allows them to leverage their shared strengths, including design innovation, brand recognition and distribution networks, to take on their European rivals.

With regard to European luxury brands:

European luxury brands have long dominated the global luxury market with household names such as Louis Vuitton, Gucci and Chanel. However, the combined power of Coach and Michael Kors poses a serious challenge as they capitalize on the ever-growing demand for luxury goods. This new US entrant is now in a position to gain more market share and potentially reshape the competitive landscape.

Synergy and innovation:

One of the advantages of this connection is the potential for synergy. By sharing resources, best practices and market insights, the combined entity can streamline operations, reduce costs and improve the overall customer experience. This approach not only increases efficiency, but also allows them to invest more in research and development, resulting in innovative products that can engage consumers and set new trends.

Global distribution:

With the combined power of Coach and Michael Kors, the new luxury giant has a stronger foundation for global expansion. They can penetrate emerging markets, consolidate their presence in established luxury markets and create a more diversified customer base. This expansion is critical to their long-term success and helps them keep up with the ever-evolving luxury industry.

Following this transformational acquisition, the luxury fashion space is witnessing the rise of a US-based powerhouse poised to take on its European rivals. Coach owner Michael Kors strategically positioned himself at the helm of the company and used his newfound synergy to create innovative products, expand globally and solidify his position as a formidable player in the luxury market. As this new era dawns, all eyes are on this American giant and how it will shape the future of luxury fashion.

The owner of leading American fashion brand Coach has made a significant investment in a strategic move to reshape the luxury fashion brand by joining forces with iconic designer Michael Kors. This bold collaboration positions the newly formed entity as a formidable contender poised to take on established European luxury rivals in the global market. Joining hands, parent company Coach has successfully combined the elegance and sophistication of the Coach brand with timeless appeal and design. the prowess of Michael Kors. 

This merger not only creates synergy in terms of design sensibility, but also amplifies the reach and market presence of the collective brand. With this landmark agreement, the American luxury fashion industry has made a bold statement and demonstrated its readiness to compete - in the lead with European luxury powerhouses. While European brands have traditionally dominated the luxury sector, this strategic partnership is a clear sign that the US market is poised to gain a significant stake in this lucrative arena. 

The combined entity is flexing its muscles and promising to redefine global luxury trends. The innovative design, unparalleled craftsmanship and brand recognition of Coach and Michael Kors, now united, will pave the way for new standards in luxury fashion. The fashionable consumer can expect an exquisite blend of American and European influences, creating a unique trend-setting identity.

 European luxury brands, known for their rich heritage and opulent offerings, now face a formidable opponent from across the Atlantic. The Coach-Michael Kors alliance presents a challenge that cannot be ignored. It brings new competition to the table and forces Europe's luxury giants to rethink their strategies and innovate to maintain their position. As the dust settles and the new luxury giant takes its place on the global stage, the fashion world is eagerly anticipating the developments that will unfold. .

 The Coach owner's savvy move to partner with Michael Kors signals a bold shift in the industry, and it will be interesting to witness how this redefined force shapes the dynamics of the luxury market on a global scale.