Breaking Down the Tapestry Inc and Capri Holdings Limited Deal

An overview of Coach, Stuart Weitzman, Jimmy Choo, Versace, Kate Spade, and Michael Kors, performance and financial results.

Sectors & Markets

26 April, 2024

Table of contents

The luxury corporations LVMH Moët Hennessy - Louis Vuitton, Kering Group, and Compagnie Financière Richemont S.A. have been major actors in the fashion business since the 1980s, dominating the European luxury market. In contrast, American corporations have traditionally centered around athletic and more accessible fashion labels. Established in 1986, VF Corporation started with the Wrangler brand and expanded over fifteen years to include names like The North Face, Vans, and Napapijri, among others, with the acquisition of Supreme in 2020 being its most recent. Another significant American player is PVH Corporation, which solidified its portfolio by acquiring Calvin Klein, Inc. in 2002 and Tommy Hilfiger seven years later.

Tapestry Inc. and Capri Holding Timeline

Before 2015, brands such as Stuart Weitzman, Jimmy Choo, Versace, Michael Kors, Kate Spade, and Coach existed as separate and independent entities. The process of centralization began in January 2015 when Coach purchased the Stuart Weitzman brand. Two years later, in July 2017, Coach acquired Kate Spade. In the same month, Michael Kors acquired Jimmy Choo. Within less than six months, Michael Kors Holdings Limited rebranded itself as Capri Holdings Limited and announced the acquisition of the Versace brand. It appears that the name change played a significant role in the deal; Capri Holdings Limited acquires Versace carries a more prestigious connotation compared to Michael Kors acquired Versace.

In August 2023, Tapestry Inc. announced a definitive agreement to acquire Capri Holdings Limited , primarily to bolster its portfolio with six brands and to expand its reach across diverse customer segments and product categories. By April 2024, Tapestry Inc. had obtained regulatory approval from the European Union and Japan, although the U.S. Federal Trade Commission (FTC) requested additional information regarding the planned merger. On the 22nd of April 2024, The Federal Trade Commission sued to block Tapestry Inc.'s $8.5 billion acquisition of Capri Holdings Limited since it would give Tapestry a dominant share of the “accessible luxury” handbag market. Handbags and accessories currently account for 50.3% of Capri Holdings Limited sales and 68.5% of Tapestry Inc..

Capri Holdings Limited issued a statement on FTC action seeking to block the proposed transaction with Tapestry Inc., saying that the market dynamics, overlooked by the government's objection, indicate that this merger will not stifle, diminish, or restrict competition. Capri and Tapestry companies intend to defend this case in court and complete the pending acquisition.

Brands’ Financial Results

The lineup of Capri Holdings Limited and Tapestry Inc. is quite alike; each company possesses a trio of brands, consisting of two ready-to-wear labels and a premium shoe brand.

Coach and Michael Kors, are the highest earners for their respective companies. Despite the industry’s overall growth, the flagship brands of Capri Holdings and Tapestry, Michael Kors and Coach, experienced notable declines in sales. Michael Kors peaked at $4.7 billion in revenue in 2016, while Coach reached its zenith with $5.1 billion in 2013. In the fiscal year 2023, Coach generated revenues of $4.9 billion, whereas Michael Kors recorded $3.9 billion, reflecting a downturn in their market performance.

Previously, Capri Holdings had aimed to elevate the group’s revenues to $8.0 billion, yet the highest they achieved was $5.6 billion in the fiscal year 2023. The acquisition of Capri Holdings by Tapestry brings a total enterprise value of $8.5 billion, represents a strategic move with a 9x adjusted EBITDA multiple based on trailing twelve-month calculations, positioning the new entity to leverage combined strengths in a bid to revitalize growth and enhance global market presence.