The Federal Trade Commission (FTC) has taken legal action to prevent Coach parent company, Tapestry, from acquiring Capri Holdings in an $8.5 billion deal. The move by regulators temporarily halts a deal that would bring together six major fashion brands under one company. Tapestry’s Coach, Kate Spade, and Stuart Weitzman would merge with Capri’s Versace, Jimmy Choo, and Michael Kors. This consolidation of luxury brands could potentially position them to compete more effectively against European luxury giants such as Burberry and Louis Vuitton.
The proposed acquisition was announced by Tapestry in August, with CEO Joanne Crevoiserat expressing confidence in the ability of the combined companies to expand their customer base globally. The deal would result in annual revenue of over $12 billion and a presence in more than 75 countries. However, the approval of U.S. officials was still pending, despite regulatory clearance from Europe and Japan.
Both Tapestry and Capri have faced challenges due to changing consumer preferences and spending habits. Capri, in particular, has been heavily reliant on department stores and wholesale retailers, making it more vulnerable to market fluctuations. On the other hand, Tapestry has focused on raising the profile of the Coach brand, attracting younger shoppers, and prioritizing fashion and loyalty over steep discounts to drive sales and profits. The majority of Tapestry’s sales come from its own website and stores, with wholesale accounting for only about 10% of global sales in the most recent fiscal quarter.
In terms of stock performance, Tapestry shares have risen approximately 10% this year, while Capri’s stock has fallen around 24% during the same period. This discrepancy reflects investors’ concerns about the potential consequences of the acquisition.
The FTC’s lawsuit adds an uncertain element to the future of this deal. The outcome of the legal proceedings will determine whether Tapestry and Capri can proceed with their plans for consolidation. As of now, the case is ongoing, and updates are expected.
