With luxury brand Versace in its portfolio, Michael Kors is building a fashion house fit to compete with the big European luxury brands.
Aspiring conglomerates like Michael Kors have been trying to stake their claim to an industry long dominated by European players – and American group Michael Kors has been clear on its goal to broaden its portfolio and customer base. It is also working to refresh its namesake brand’s image. Added to last year’s purchase of British high-end shoe maker Jimmy Choo, the Versace acquisition gives Michael Kors three major fashion houses.
“With the acquisition of Versace we have created one of the world’s leading fashion and luxury groups”, said John Idol, Chairman and CEO of Michael Kors Holdings. The company will be renamed Capri Holdings to better suit its ascent in the luxury industry.
Idol said that Capri does not intend to make any further acquisitions, but instead focus on developing the three brands. It has big plans for Versace: to grow its global sales to $2 billion globally, reach profit margins in the “high teens range”, open about 100 new stores, and boost online sales. It also aims to raise the share of higher-margin footwear and accessories from 35% of sales to 60%. “Versace is terribly under-developed. That is going to change with the resources of Capri behind them,” Idol said.
There is room to grow. “The Versace brand has strong global growth potential which is untapped across all regions, particularly Asia and North America”, Cowen analysts said.
Milan-based Versace represents the latest in a series of Italian luxury brands being acquired by foreign firms. Rome-based Fendi and jeweler Bulgari were bought by French multinational LVMH. Kering, another French luxury group, now owns Gucci, Bottega Veneta and menswear brand Brioni. Versace in particular was one of a group of family-owned Italian brands considered attractive targets as the luxury industry continues to thrive on demand from China, Reuters reports.
Some in the fashion world bemoan the deal, but it is also meant to revitalize Versace. “We believe that being part of this group is essential to Versace’s long-term success. My passion has never been stronger”, said Donatella Versace, the sister of Versace’s late founder. Jonathan Akeroyd will remain as CEO of Versace, while Donatella Versace will “continue to lead the company’s creative vision”, Idol said, in her current role as artistic director and Vice President.
The Versace family, which owns 80% of the fashion house, will receive 150 million euros of the purchase price in Capri shares. The remaining 20% was purchased by an American private equity firm in 2014. The deal is expected to close in the fourth fiscal quarter.
