Luxury Fashion Superpower with Tapestry, Inc.’s Acquisition of Capri Holdings
On August 10th, 2023 fashion house Tapestry, Inc. (NYSE: TPR) announced a definitive agreement to acquire luxury group Capri Holdings (NYSE: CPRI). The all-cash transaction of $57 per share (approximately $8.5 billion enterprise value) moves to create a powerful global fashion company.
This acquisition will result in over $12 billion in sales and $2 billion in adjusted operating profit. Additionally, the global brand will span 75 countries, creating an opportunity to tap into a wider, global, high-end customer base. Tapestry includes such iconic brands like Coach, Kate Spade New York and Stuart Weitzman. In a boost to luxury, Capri will add brands including Versace, Jimmy Choo and Michael Kors. The combined company will expand its footprint in the accessible luxury marketplace. Also, in terms of environmental, social, and governance efforts (ESG), the leadership team is committed to “a more sustainable, equitable, and inclusive future”.
What is accessible luxury?
The term “accessible luxury” may sound like an oxymoron. A portion of the consumer market is attracted to products labeled at “accessible luxury” as they are seen as high quality and prestigious at a lower price point than a luxury offering. The customer will feel a certain sense of status without the attachment of an astronomical price tag associated with luxury labels. According to Vogue Business, it may “include mid-market retailers such as J.Crew. Or a specific segment of premium, such as Sandro. Or a slice of luxury, such as Michael Kors.”
What is a luxury label?
When one thinks about a prestigious luxury group it is likely that LVMH comes to mind. LVMH, or LVMH Moët Hennessy Louis Vuitton, led by Chairman and CEO Bernard Arnault, was founded in 1987 and now has 75 houses of high-end products across 6 sectors. In 2022, sales were 79.2 billion euros and the company boasted over 196,000 employees.
Extravagant, stylish, and upscale names comprise LVMH’s brand portfolio. In terms of fashion and leather goods, LVMH has incredible name recognition with Celine, Christian Dior, Emilio Pucci, Fendi, Givenchy, Kenzo, Loro Piana, Louis Vuitton, and Marc Jacobs. Its wine and spirits holdings include such heavyweights as Belvedere, Dom Perignon, Hennessy, Krug, Moet & Chandon, and Veuve Clicquot. With perfumes and cosmetics, it has popular lines like Acqua di Parma, Benefit Cosmetics, Fenty Beauty by Rihanna, Fresh, and STELLA by Stella McCartney. Its elegant watches and jewelry names include Bulgari, Hublot, TAG Heuer, and Tiffany & Co. In selective retailing the company enjoys La Grande Epicerie de Paris, Sephora, and Starboard Cruise Services. LVMH’s other activities line includes Belmond, Cheval Blanc, Le Parisien, and Royal Van Lent.
At times, luxury brands tap into the “accessible luxury” space and customer base. For example, a high-end brand that offers more affordable cosmetics or perfumes or even accessories such as key chains, scarves, belts, or shoes.
History of Tapestry
In 1985, Tapestry’s predecessor company, Coach, was acquired by Sara Lee Corporation. Coach, Inc. was listed on the NYSE in 2000. By 2001, Sara Lee distributed the remainder of Coach, Inc. The company made strategic efforts with the Stuart Weitzman Holdings LLC acquisition which happened in 2015 and the Kate Spade & Company acquisition which occurred in 2017. In 2017, the management team announced the official name change to Tapestry, Inc.
What next?
The combined companies will expand Tapestry’s luxury footprint. The management team is committed to brand building through marketing efforts as well as expanding its digital platforms to engage consumers.
Tapestry’s CEO, Joanne Crevoiserat, believes “we are ready to leverage our competitive advantages across a broader portfolio of brands” as it “creates a new powerful global luxury house, unlocking a unique opportunity to drive enhanced value for our consumers, employees, communities, and shareholders around the world”. While Capri’s Chairman and CEO, John D. Idol, adds “we are confident this combination will deliver immediate value to our shareholders” and “by joining with Tapestry, we will have greater resources and capabilities to accelerate the expansion of our global reach while preserving the unique DNA of our brands”.
This acquisition will enable the combined companies to expand their geographical presence and reach customers outside of the United States into other regions such as Asia, including the large China market, the Middle East, and Europe. This is especially important as the United States retail marketplace has witnessed a slowdown in discretionary retail spending due to lingering inflation concerns.
Subject to regulatory approvals and closing conditions, the acquisition should close in calendar year 2024.
Sources:
https://www.voguebusiness.com/consumers/accessible-luxury-china-opportunity-smcp-dvf
https://www.lvmh.com/group/about-lvmh/mission-lvmh/
https://www.sec.gov/Archives/edgar/data/1116132/000111613220000022/tpr6272020-10k.htm
