In a $8.5 billion transaction, Tapestry, Inc., the parent company of Coach, Kate Spade, and Stuart Weitzman, has acquired Capri Holdings, the parent company of Versace, Michael Kors, and Jimmy Choo. On August 10, the accessory and lifestyle brands announced their plan to join forces under the Tapestry name in a merger that holds the potential to reshape the standards and leaders of both US and global fashion.
By bringing the six brands together under one roof, each brand will benefit from the structure of a unified model. European luxury brands have already mastered this, proven by their ability to maintain leadership on a global level. Now, Tapestry can maximize its presence in the accessible luxury world while marketing itself as the dominant standard in US fashion.
In a company release, Tapestry, Inc. CEO Joanne Crevoiserat stated, “From this position of strength, we are ready to leverage our competitive advantages across a broader portfolio of brands. The combination of Coach, Kate Spade, and Stuart Weitzman, together with Versace, Jimmy Choo, and Michael Kors, creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world.”
The merger will also create a path to enhance total shareholder return (TSR), with Tapestry and Capri expecting to deliver significant financial returns and boost gradual growth, all while reaffirming their commitment to capital return. And with plans to implement a robust environmental, social, and governance (ESG) strategy, Tapestry and Capri are positioned to “drive progress toward a more sustainable, equitable, and inclusive future.”
Staff are also expected to benefit, as Tapestry and Capri anticipate to employ north of 33,000 employees. Additionally, the brands expect to cut operation costs and increase supply chain efficiency, saving nearly $200 million over the next three years. Operations—from infrastructure, marketing, and human resources— will see significant benefits moving forward.
When determining how this merger compares to other luxury brands, it’s imperative to highlight that these comparisons are not necessarily apple to apple. Because of Tapestry and Capri’s niche market, accessible American luxury, they’ve positioned themselves as potentially leading the charge in bolstering their North American direct-to-consumer penetration over time. GlobalData Director Neil Saunders stated in a note to investors that, although they have work to do to elevate their brands to the level of their European counterparts, in time, Tapestry can “wield a significant influence in the luxury market.”
Property of Tapestry, Inc. and Capri Limited Holdings.
Cathleen Chen, Retail Correspondent for The Business of Fashion, highlighted an excellent point, “The success won’t hinge on Coach handbags going toe-to-toe with Gucci or Dior for wealthy shoppers’ attention. But Tapestry will need to keep up the momentum at its flagship brand, where savvy marketing and higher prices have recently boosted sales. Most importantly, the company must quickly develop a strategy to boost Capri’s brands. Both Versace and Michael Kors are amid turnarounds.”
The next three years will be critical for Tapestry and Capri to implement their plans, foster synergy, and ensure each brand is managed and marketed to its highest potential. They’ll also need to gain more momentum internationally. With luxury spending on a downturn in the North American market, they can offer a middle ground to American consumers looking to purchase quality items at a lower price point. But they’ll also need to foster international markets to bolster growth overall.