Following today’s news that Tapestry is acquiring Capri Holdings in a $8.5bn deal;

Louise Deglise-Favre, Apparel Analyst at GlobalData, a leading data and analytics company, offers her view:

“Tapestry has announced it will acquire Capri Holdings in 2024 for $8.5bn, adding Michael Kors, Jimmy Choo and Versace to its existing brand portfolio consisting of Coach, Kate Spade and Stuart Weitzman. The acquisition will set Tapestry as a major American fashion conglomerate, allowing it to better compete with European rivals such as LVMH and Kering, and strengthen its position within the “affordable luxury” market.

“However, the deal comes with a lot of risk, given the hefty price tag and Michael Kors’ fragile position following years of lacklustre performance. Tapestry will have to repeat the tour-de-force it performed at Coach and Kate Spade to turn Michael Kors’ failing brand image around and re-establish it as a desirable label, all while keeping the momentum going at Versace and Jimmy Choo. With six brands now under its responsibility, Tapestry is in danger of becoming too thinly spread, and diverting attention away from its existing brands could sabotage the efforts it has made to rebuild their appeal.

“Further international expansion will also need to be a priority to diversify revenue at its new brands away from the US. The Americas region dragged Capri’s performance down in its most recent results (Q4 FY2023 to 1 April), declining 16.3%, as high inflation continues to wreak havoc on shoppers’ budgets. Aspirational shoppers have particularly been hit in more recent months too, contributing to a US slowdown even at LVMH and Kering in Q2, so it is likely performance for Capri has worsened.”