Can Capri’s rumored sale of Versace and Jimmy Choo save Michael Kors? (#1687395)

Timing sure is everything, especially in business. In recent years, the current U.S. administration has gained a reputation for a more aggressive stance on antitrust, thus resulting in the Federal Trade Commission (FTC), and the Department of Justice, Antitrust Division (DOJ), implementing new guidelines and rules for mergers.

Some believe the Trump administration will be more lenient in this regard. In fashion, the Saks–Neiman Marcus merger came under scrutiny, but the deal has seemingly escaped being blocked by the FTC and DOJ.

However, the bid from Tapestry, which owns Coach, Stuart Weitzman, and Kate Spade, to acquire Capri Holdings Limited, which includes Michael Kors, Versace, and Jimmy Choo, was blocked, and the deal was scrapped. Thus, the year ends with Capri plotting its next move, which appears to involve selling off Versace and Jimmy Choo.

Ultimately, the goal is to revive the group’s core business, the Michael Kors brand. At its height in 2016, the brand reported $4.71 billion, held steady at around $4.5 billion in the following three years, and, like many companies, suffered a loss in fiscal year 2021, due to the effects of the pandemic.

Currently, the brand is valued at $3.52 billion, down 22 percent from 2019 when it acquired Versace and formed Capri Holdings Limited, led by chairman and CEO John Idol, after acquiring luxury shoe brand Jimmy Choo.

Capri’s stocks dropped 46 percent after the $8.5 billion deal was scrapped this past October.

Interestingly, Versace, which was once valued at $1 billion prior to almost going public in 1997—that deal never happened, due to the untimely murder of Gianni Versace by Andrew Cunanan in Miami Beach that same year—was only valued at $137 million in 2019 when Capri acquired it for $2.1 billion.

Its sales soared the next year to $843 million, took a pandemic-induced dip, and hit $1 billion in 2022, topping out at $1.1 billion in 2023 and landing at $1.03 billion in 2024.

Versace has had its share of ups and downs post-Gianni, with some family drama involving sister Donatella, who remains its artistic director, struggling with addiction shortly after Gianni’s death, and brother Santo, the current president and co-CEO, who navigated a jail sentence after being found of bribing officials for favorable tax audits.

Still, there were highs for the brand, such as JLo’s now iconic green Versace dress worn to the Grammy’s and a 90s-supermodel-reunion-slash-tribute-show in 2017.

More recently, celebrities such as Ariana Grande, Taylor Swift, and Nicole Kidman wore the designs to red-carpet events. Gen Z is having a ball reviving interest in its Barocco prints shirts, with resale sites commanding four figures for the originals. This might explain how Versace inexplicably ended up in third place, behind Dior and Louis Vuitton, on the Brand Magic Index produced by Business of Fashion and Quilt.AI for the period October 2023 to March 2024.

Additionally, Versace has multiple categories, including many healthy licensing deals for fragrance, eyewear, kids’ clothing, home goods, residences, and hotels, which generate revenue.

It’s similar to the Jimmy Choo purchase in 2017 when the Kors company acquired the British, Italian-made shoe company for $1.2 billion. Its 2018 sales were $222.6 millon and have averaged about $600 million since 2019.

Former Vogue journalist Tamara Mellon partnered with London’s handmade shoemaker Jimmy Choo Yeang Keat to create a globally distributed and produced luxury shoe line out of the bespoke business. She subsequently bought him out in 2001. Next, Mellon sold Jimmy Choo to Labelux, owned by JAB Holdings, in 2011, from which Kors acquired it.

Jimmy Choo was a star brand thanks to being made popular by Princess Diana in 1996, then “Sex and the City,” and “The Devil Wears Prada,” which made it a household name. Mellon’s social connections and its red-carpet-worthy stilettos, also contributed to its popularity which has ceded of late.

See catwalk

For starters, the athleisure movement that began around 2015 allowing trainers to be worn with business attire and along with Gen Z’s penchant for thick lug sole styles, Nike Air Force 1 shoes and reviving the ballet flat, loafers, and Mary Janes have made daily, even nightly dressing, in sky-high sexy shoes almost passé. A recent campaign starring Winona Ryder appears to be a shot in the relativity arm.

The Capri group began closing stores during the pandemic after sales plunged 70%, though today, Versace has 230 boutiques and 638 licensed stores worldwide, while Choo has 43 stores in the U.S., 68 in the EMEA region, and 123 in Asia.

The retail juggernaut is the Michael Kors brand, with 320 stores in Asia, 293 in the Americas, and 156 in the EMEA region.

Will dropping Versace and Jimmy Choo make a difference for Kors? It could, presuming they recoup at least the initial investment. However, reviewing Kors’ brand portfolio is highly important. A review of those multiple retail outlets’ performance is key. As the brand just repositioned its Madison Avenue store to a consolidated single lever space, a focus on a VIC experience, and closer to the foot traffic of 57th Street, it may already be heading in that direction.

It may need to delineate its product offerings as merchandising both the Michael Kors Collection and the Michael Michael Kors line—presumably the breadwinner—may have resulted in customer confusion and perhaps damaged its Collection product’s luxury status.

It might also want to consider expanding the branding beyond women’s and men’s clothing and accessories to explore other categories and partnerships, as many of their designer brand contemporaries have. The company has presumably learned much about that from Versace these past five years and Michael Kors the man and brand are synonymous with the Jet Set, so it fits the brand.

Retail consultant Robert Burke observes that all three brands have different business models. “For Capri, the focus is Kors. Versace and Jimmy Choo are interesting and attractive brands, and I assume Capri would profit from their sale, leaving cash to infuse into Michael Kors,” he told FashionNetwork.com.

Burke doesn’t see a sale where one entity bought both. “They should be sold separately. Jimmy Choo is a good brand; it’s not broken and doesn’t need an overhaul. It’s historically a leader in independent designer shoes. This category is more unique today as designer brands amped up footwear offerings,” he said, adding, “Versace may need some updating from the street-style trend. We see a back off from that and, in its place, a product in the market that is less logo-driven, more understated, and quality versus loud. It should retain its rock’n’roll elegance, though.”

Since Kors was at its height in revenue eight years ago, retail has changed.

“I’m sure that the Michael Kors brand has felt the strain of the department stores, which are very different today than in 2016. The promotional stance and cadences that these stores have must have had an impact on the brand.”

The rocky retail landscape, a pandemic, brand delineation, and dealing with three unique brands may have waylaid Capri Holdings’ plans to build a luxury group. Still, with revenue of $3.52 billion for the Michael Kors brand, it’s hardly game over.