On Wednesday, Capri Holdings, formerly Michael Kors Holdings, began trading on the New York Stock Exchange with the ticker symbol CPRI, making good on a name change announced in September that the company said reflects its wider, global luxury ambitions.
The company has also closed its deal to acquire Italian fashion brand Versace for a total enterprise value of €1.83 billion (or approximately $2.12 billion on the date of the announcement), Capri said in a press release. The cash portion of the purchase was funded by a combination of cash on hand, drawings under its revolving credit facility and bank term loans, according to the release.
The Versace family also reinvested an aggregate of €150 million of the cash received for their interests in Versace in exchange for 2,395,170 ordinary shares of Capri Holdings. Donatella Versace is staying on as Chief Creative Officer, the company also said.
Similar to how Coach has grown into Tapestry through acquisition, Capri is building a fashion conglomerate to pivot to a luxury stance and higher prices.
In a statement this week, Capri CEO John Idol insisted that the company's acquisition of Versace has helped it become "one of the leading global fashion luxury groups in the world." The company aims to leverage Versace to pave its way to revenues of $8 billion "in the long-term," growing Versace to $2 billion, Jimmy Choo (acquired in 2017 for $1.2 billion) to $1 billion and Michael Kors to $5 billion, according to its release.
But it's not quite so easy as that. The question remains whether Capri will see the same results that Coach has enjoyed in its own quest for a high fashion, higher spending customer. Not only must its Kors brand now play catch up to Coach, but its Versace brand is also in need of much more of a revamp than Tapestry faced in acquiring Kate Spade in 2017 for $2.4 billion.
In fact, some analysts warned that figuring out how to reposition Versace, a once-vibrant brand whose outré style is both out of step with current fashions yet is nevertheless quite indelible, could prove to be a distraction for Capri. It's a huge project that threatens to steal focus from the problems still besetting Kors, including retail comps weakness, an oversized wholesale segment and ongoing licensing issues. In fact, in a note to Tapestry investors last month and emailed to Retail Dive, Wells Fargo analysts said that the continuing struggles at Kors could be a boon to the Coach brand.