Luxury juggernauts Tapestry and Capri head to court to save their $8.5B fashion merger
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Not so clutch… Tapestry and Capri are strutting from the catwalk to the courtroom. Last year Tapestry agreed to buy Capri for $8.5B, but the deal hit a snag after the Federal Trade Commission sued in April, arguing that the merger would hurt competition in the “accessible luxury” market (think: bags priced from $100 to $1K). Tapestry owns designer brands like Stuart Weitzman, Kate Spade, and Coach. Capri owns luxe names like Jimmy Choo, Versace, and Michael Kors. On Monday, Tapestry, Capri, and the FTC headed to a New York federal court to make their case.
The FTC said: The merger could give Tapestry control of over half the accessible luxury-handbag market — and the power to hike prices.
Tapestry said: Shoppers would still have plenty of handbag options from rivals like Gucci and Calvin Klein.
In season: The trial is expected to last a week and a half. Antitrust regulators in Japan and the EU have already approved the deal.
Stuck in the ’burbs… US luxury houses have long trailed European rivals like Louis Vuitton, Fendi, and Dior. To catch up, Tapestry scooped up rivals and revamped its profit puppy, Coach, to attract zillennial shoppers. It’s not the only fashion icon looking for ways to pull in more shoppers: as more middle-class consumers get priced out of the high-end market, labels like Burberry and Kering’s Saint Laurent have started offering discounts and price cuts. FYI: over half of all global luxury buys come from folks who spend under $2.2K/year on handbags, clothes, or jewelry.
Accessibility is the new black… Middle-class consumers may not splurge on $25K blue Birkin bags, but they’re still essential for designers. Aspirational shoppers are expected to make up half of luxury sales in the coming years. And while the Tapestry-Capri deal could help their brands weather a luxe-spending slowdown, regulators fear it could put pressure on everyday shoppers.