US merger creates fashion powerhouse: Tapestry to buy Versace parent Capri for £8bn

Top brands including Versace, Jimmy Choo, Michael Kors and Kate Spade will be brought together under one roof in a £7billion luxury mega-merger.

Tapestry, the parent company behind the designer handbag seller Coach, is set to buy Capri Holdings creating a new US fashion powerhouse.

New York-listed Tapestry owns brands including Kate Spade and shoe firm Stuart Weitzman, as well as Coach, whose bags are advertised by singer Jennifer Lopez.

Capri, also listed in the Big Apple, has a portfolio that includes Italian fashion house Versace and Jimmy Choo – whose heels are loved by Sex and the City’s Carrie Bradshaw.

It also owns Michael Kors, which designed dresses for former First Lady Michelle Obama.

Star: Hailey Bieber for Jimmy Choo. Luxury giants have been consolidating in recent years, although US firms tend to be dwarfed in scale by their European rivals

Tapestry chief executive Joanne Crevoiserat said: ‘The combination of Coach, Kate Spade, and Stuart Weitzman together with Versace, Jimmy Choo, and Michael Kors creates a new powerful global luxury house.’

Shares in Capri shot 56 per cent higher as Tapestry’s all-cash offer of £45 per share represented a premium of 59 per cent.

Before the Tapestry deal, shares in Capri were down 40 per cent this year after it cut its outlook for the current financial year and reported third-quarter results below its own forecasts.

Yesterday Tapestry saw its shares sink 17per cent, which raised eyebrows among luxury fashion analysts who warned it was ‘hardly a ringing endorsement’ of the deal.

Bosses will be hoping the tie-up can give European rival LVMH a run for its money as the luxury sector grapples with fears over both the US and Chinese economies.

Luxury giants have been consolidating in recent years, although US firms tend to be dwarfed in scale by their European rivals.

Last month, French fashion giant Kering, which owns Gucci, said it was buying a 30 per centstake in the Italian label Valentino. 

And Bernard Arnault’s LVMH paid £12billion to acquire jeweller Tiffany in early 2021, bolstering its roster to 75 brands including Louis Vuitton and Dior.

A long list of New York-based designers have ended up selling to one of the European groups, including Marc Jacobs, Thom Browne, Donna Karan and Virgil Abloh’s Off-White. 

These deals have not always been fruitful. Marc Jacobs struggled for years with a lack of investment and a botched restructuring, while LVMH sold off the DKNY and Donna Karan brands.

Tapestry will be hoping the consolidation boosts the presence of its individual brands as storm clouds gather over the global economy.

There have been mounting concerns that a slowdown in the US is hitting sales of high-end clothes and accessories, with British brand Burberry joining LVMH in lamenting a sales decline there.

Consumers in the US are tightening their belts amid the higher cost of living and fears of a recession.

Stocks in luxury brands, including Cartier-owner Richemont, have also been dragged down recently after disappointing economic updates in China.

Deals: Jennifer Lopez for Coach, left, and Dua Lipa in Versace. Shares in Capri shot 56% higher as Tapestry’s all-cash offer of £45 per share represented a premium of 59%

This week there were concerns that the country’s economic growth could be hindered as the economy slipped into deflation.

Share prices in luxury firms were also hammered a few weeks ago when China’s gross domestic product figures were weaker than expected.

Russ Mould, analyst at AJ Bell, said: ‘Whether the purchase of Capri creates a rival to LVMH is debatable, at least looking at what the stock market thinks.

‘Investors seem worried about the debt component of the deal and whether that will limit the buyer’s ability to invest further.’

The analyst also warned that aspirational consumers, who are the clientele for Tapestry and more affordable products, may cut back on flashy purchases ‘when times get tough’. 

‘True luxury goods appeal to the plutocrat who can buy whatever the economic weather, and LVMH has more of those customers,’ he cautioned.

Although Tapestry and Capri turn solid profits, Arnault’s empire was ‘in a different league’ with a forecast for a 28 per cent return on sales this year. 

‘LVMH’s brands are more valuable and more profitable and it has more of them – its annual sales base is more than seven times the combined Tapestry and Coach number,’ Mould added.

But news of the deal will have stung Bernard Arnault, who is rumoured to have had his eye on Versace despite selling it to Michael Kors in 2018 for £1.6billion.

The brand has designed red- carpet looks for starlets such as actresses Anne Hathaway and Dua Lipa. ‘Versace has big potential,’ Bernstein analyst Luca Solca said.

Versace has been steered by brother and sister duo Santo and Donatella Versace for 25 years, after the label’s founder Gianni was gunned down outside his mansion in Miami in 1997.

Shares in other luxury fashion firms were boosted, with London-listed Burberry rising 3 per cent and the French Birkin bag maker Hermes also up 3 per cent. 

Other global giants to be buoyed included Estee Lauder, Hermes, L’Oreal and Prada as analysts said the sector is heading for another wave of consolidation. 

The boards of Tapestry and Capri have approved the deal, which is expected to close next year. It still needs approval from Capri shareholders.

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