There’s a Brand New Luxury Conglomerate in Town

Richemont, Kering, LVMH and… Tapestry? CEO Joanne Crevoiserat says the company acquired Capri Holdings to better compete in the growing $200+ billion global luxury market.

Last week, Tapestry Inc. (which owns Coach, Kate Spade and Stuart Weitzman) inked a deal to acquire Capri Holdings Limited (parent company of Versace, Michael Kors and Jimmy Choo) for $8.5 billion. The acquisition, which is slated to be finalized sometime in 2024, will bring six of the world’s largest designer brands together under one roof, creating a U.S.-based luxury conglomerate that could be capable of competing in a global market largely dominated by LVMH, Kering and Richemont.

Michael Kors Collection Spring/Summer 2023 Runway Show - Front Row & Backstage
Capri Holdings CEO John D. Idol with Anna Wintour. Getty Images for Michael Kors

Which isn’t to say that the Tapestry x Capri Holdings collaboration poses a threat to European heritage player dominance in the luxury market. The new global fashion group, which will have a presence in 75 countries, generated combined annual sales of more than $12 billion last year, which is nowhere near the $46.6 billion in sales reported by LVMH for just the first half of 2023.

So when Tapestry CEO Joanne Crevoiserat wrote on LinkedIn about competing in the growing $200+ billion global luxury market for new consumers and market segments, she may have had her sights set on Richemont, the parent company of brands like Cartier and Van Cleef & Arpels. It owns around 50 fewer companies than LVMH (LVMHF) and last year reported sales of roughly $18.3 billion.

“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,” said Capri Holdings CEO John D. Idol in a statement, and that brand DNA might be precisely what helps Tapestry become, if not the LVMH of the U.S., perhaps the Richemont.

Versace Michael Kors merger confirmed
The Versace family received a pile of cash and $177 million worth of equity in the Kors merger. Getty Images

Some might wonder how that could work given that luxury consumption in the U.S. has slowed in the past few months. In LVMH’s second-quarter earnings call, chief financial officer Jean-Jacques Guiony reported seeing a decline in shopping by “aspirational customers” in the U.S.—“a special group of customers that were benefiting from subsidies in the Covid pandemic period.”

It may be that Tapestry is hedging its bets on the domestic decline in luxury sales. In a CNBC interview, Crevoiserat suggested the acquisition will let Tapestry reach customers with a more diverse range of incomes. One can imagine that middle-class shoppers who once purchased higher-end entry-level luxury goods might, in leaner times, be more likely to splash out on a Coach tote than a Hermès wallet.

“Tapestry has long targeted becoming a bona fide ‘house of luxury’ like Kering or LVMH, but its current brands are near-luxe rather than true luxe,” Craig Johnson, president of Customer Growth Partners, told WWD, adding that Capri Holdings also offers Tapestry the opportunity to expand into LVMH territory in the future with Versace and Jimmy Choo.

There’s a Brand New Luxury Conglomerate in Town