Tapestry acquires Capri Holdings in a $8.5B merger that will rival LVMH, increase presence in China

What happened Luxury industry insiders were abuzz as Tapestry, the parent company of Coach and Kate Spade, announced its acquisition of Capri Holdings, the umbrella group for Versace and Michael Kors, in a deal worth approximately 8.5 billion on Thursday. This high-stakes merger is positioned as a direct challenge to European luxury conglomerates LVMH and Kering, which have long dominated the luxury market. The move comes at a time when luxury retailers, especially in the US, are grappling with changing consumer behaviors and a potential pullback in discretionary spending. Many brands are turning their focus to Chinese consumers, in hopes that the nation’s reopening will see continued post-pandemic rebound spending. By joining forces, Tapestry and Capri Holdings aim to generate a combined revenue of about 12 billion, bringing together a diverse portfolio of brands, from affordable designer labels like Coach and Kate Spade to high-end houses like Versace and Jimmy Choo. The consolidated entity will operate under the name Tapestry. The Jing Take Tapestry’s strategic move is not only about numbers — it's about positioning. For years, American luxury brands have been overshadowed by their European counterparts, especially brands under the LVMH and Kering umbrellas. Europe-based brands like Christian Dior, Balenciaga, Gucci, and Saint Laurent, have set the gold standard in luxury fashion. This merger is a clear statement from Tapestry: American luxury is ready to compete on the global stage. Joanne Crevoiserat, the CEO of Tapestry, emphasized the financial and strategic potential of the merger, noting that it offers an opportunity to "deepen engagement with luxury customers on the high end." The acquisition is expected to expand Tapestry's footprint in Europe, the Middle East, and Africa, while Capri's brands will benefit from increased exposure in Asia. Earlier this year, Capri Holdings sent its executive team to China with the goal of raising its strategic investment in the country. The group also hosted its Michael Kors “Jet Set” event at a Hainan resort in late March, seeking to better engage with a new generation of Chinese consumers following the nation’s reopening. “China is an important long-term growth opportunity for our three luxury houses, Versace, Jimmy Choo and Michael Kors,” Capri Holdings CEO John Idol stated at the time. “We will continue to increase our strategic investments in the country, including new stores openings and events.” Meanwhile, in recent years, Tapestry has also set its sights on expanding further in China. In 2022, the firm announced it would open 30 new Coach stores with a specific focus on launching in lower-tier cities across the nation. Tapestry’s strategy to make Coach’s “accessible luxury” even more readily available takes place as China faces a new era of post-pandemic uncertainty and economic downturn. As for the Tapestry-Capri merger, the road ahead is also not without challenges. The term "synergies" was frequently mentioned during investor calls, referring to the benefits derived from pooling resources, sharing digital and marketing capabilities, and optimizing supply chains. But as Simeon Siegel, a retail analyst at BMO Capital Markets pointed out, achieving these synergies is easier said than done. The luxury market has witnessed a flurry of mergers and acquisitions in recent years. From Kering's stake in Valentino to LVMH's acquisition of Tiffany & Co., the industry is consolidating, driven by the need to diversify portfolios and tap into new markets. Even with this merger, Tapestry's combined sales will still pale in comparison to the likes of LVMH, which reported sales of €79 billion (86.8 billion) in 2022. The majority of Tapestry's brands target "aspirational luxury shoppers," a segment more susceptible to economic downturns. And with this merger, Tapestry is clearly eyeing a bigger slice of the luxury pie, aiming to elevate its brands and appeal to a broader, more affluent consumer base. Only time will tell if this American luxury powerhouse can truly rival the European giants, but one thing is clear: The luxury fashion landscape is set for a major shift. Additional reporting by Crystal Tai The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

Tapestry acquires Capri Holdings in a $8.5B merger that will rival LVMH, increase presence in China

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Published August 11, 2023

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Tapestry acquires Capri Holdings in a $8.5B merger that will rival LVMH, increase presence in China