Michael Kors, in announcing its deal to purchase the fashion house Versace for $2.1 billion two weeks ago on September 25, continued the trend of consolidation among global luxury brands in the fashion industry that has occurred over the past few years. Just a year before, Michael Kors purchased Jimmy Choo, the luxury shoe designer, for $1.2 billion. The acquisition of the iconic Italian brand by an American company came as a surprise to many and represents the development of the first American international luxury group.
The acquisition of the Versace brand clearly demonstrates a push on behalf of Michael Kors to further sediment its place in the highly exclusive international luxury fashion markets. Michael Kors, which designs a range of ready-to-wear clothing, jewelry, watches, and handbags, primarily deals in the middle market of American fashion, and its products are sold in outlets and department stores, making it relatively accessible to consumers. Versace, however, is known for its extravagant designs and its gowns and bags alike can sell for thousands of dollars.
In addition to making Michael Kors even more relevant in higher-end markets, there are significant financial incentives involved in the acquisition. Michael Kors plans on increasing the number of Versace storefronts from 200 to 300 in the next few years. With the expansion of stores, the company hopes to increase Versace’s projected sales of 850 million for this year to 2 billion over the course of the next few years. In addition to opening 100 more storefronts, Michael Kors plans on strengthening Versace’s online sales and increase focus on high-end accessories in order to reach their ambitious sales goals.
In the almost two weeks since Michael Kors announced the consolidation, its stock has risen 3 percent as analysts look favorably on the risky purchase. Analysts from the brokerage Citigroup specifically predicted that the acquisition, although risky and expensive, would help generate profits for the fashion house.
So what does this newest consolidation of brands mean for the international fashion industry? For one, it demonstrates the growing presence and relevance of American designers in an industry once dominated by European fashion houses. In Italy, there was significant controversy over the purchase and the loss of another Italian brand to an American company. But while there was an intense backlash in response to the acquisition from Italians and global fashion lovers alike, don’t expect a drastic change in the iconic branding of Versace. Donatella Versace, the brand’s chief designer, will continue to work on the brand according to John D. Idol, the chairman and CEO of Michael Kors.
Information obtained from
http://www.latimes.com/fashion/la-ig-wwd-michael-kors-versace-20180925-s…
https://www.nytimes.com/aponline/2018/09/25/us/ap-us-versace-sale.html
https://www.nytimes.com/2018/09/25/business/dealbook/michael-kors-versace.html
https://finance.yahoo.com/m/ee291245-daed-3ef2-9a33-bbabcfe97d34/michael-kors-stock-rises.html
Images obtained from
https://fashionista.com/2018/09/michael-kors-buying-versace-acquisition
https://www.ifashionnetwork.com/michael-kors-resort-collection-2018/