Michael Kors on Tuesday announced that it will acquire luxe footwear brand Jimmy Choo for £896 million, or roughly $1.2 billion — a deal with an enterprise value of $1.35 billion. The transaction has been approved by the boards of directors of both Michael Kors and Jimmy Choo, according to a company press release.
The acquisition is an opportunity to grow Jimmy Choo sales to $1 billion and it provides greater exposure to global markets, particularly in Asia. The merger also provides both companies with a more balanced portfolio and greater product diversification; gives Michael Kors an enhanced positioning in the attractive and growing luxury footwear segment; and allows an opportunity to grow men’s luxury footwear sales and luxury accessories sales, the company also said.
- In April, Jimmy Choo’s majority shareholder, JAB Luxury, an investment company run by German billionaire family Reimann, confirmed the brand had put itself up for sale. The brand runs about 150 company-operated retail stores, 560 multi-brand doors and more than 60 franchise stores in premier locations worldwide, according to Michael Kors' announcement.
Jimmy Choo was founded in London in 1996 by Malaysian fashion designer Jimmy Choo and then-Vogue editor Tamara Mellon. They've since left, and the brand has been run by CEO Pierre Denis since 2012 and Creative Director Sandra Choi, who was been there since its founding and in that position since 2013. Both will stay on through the acquisition, Michael Kors CEO John Idol said in a statement, adding "Our two companies share the same vision of style and trend leadership. Our luxury heritage is the foundation of Jimmy Choo and we will continue to bring our brand vision to consumers globally."
The brand rose to prominence in the early part of the 21st century during the run of the television show “Sex and the City,” which positioned the uber-pricey footwear as a symbol of success for fashionable, independent women in New York City. Women's shoes remain the core of the product offer, alongside handbags, small leather goods, scarves, sunglasses, eyewear, belts and fragrances. More recently the company expanded to men's shoes — sales of which are growing more swiftly than sales of women’s items, even if they remain a smaller slice of the pie.
Sales have been sluggish of late, however, as the waning post-Brexit pound has helped dampen demand in Europe and the strong dollar has hurt sales stateside. Sales in China, however, have remained robust. High-end luxury retailers like Burberry and Kate Spade have also felt the pinch; comeback accessories retailer Coach in May snapped up Kate Spade for $2.4 billion.
The Coach and Michael Kors deals help each brand diversify its customer base, according to retail analysts at Jane Hali & Associates. "[Coach] is now mostly luxury with their 1941 brand, and their acquisition of KATE gives them a strong hold in the affordable luxury market," Jane Hali wrote in a note emailed to Retail Dive on Tuesday. "KORS is working in reverse; they are known for the affordable line of Michael and now with the acquisition of Jimmy Choo they are building strength in the luxury market."
And that's a good move, Hali said, because it gives Michael Kors a stronger hold in the luxury sector. "KORS collection is a small part of the Michael Kors story- Michael is the real business," according to the note. "We are seeing small global growth again in the luxury sector through tourism in Europe and within Asia, as well as e-commerce in Europe, based on the devaluation of the Euro and British Sterling."
Michael Kors plans to close 125 stores over the next two years to raise its profit levels. That announcement came as the company in May reported a nearly $27 million drop in revenue for its fourth quarter (an 11.2% decline). The company on Tuesday said its acquisition will enhance the company’s economic value and drive improved long-term shareholder value, and that it's expected to be accretive on a GAAP basis in fiscal 2020. The deal isn't subject to a financing condition. Michael Kors has committed bridge financing from JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA to satisfy the certain funds requirement of the U.K. Takeover Code to complete the transaction, the company said.