Pedestrians walked past a Coach store and a Michael Kors store.
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The U.S. Federal Trade Commission filed a lawsuit on Monday seeking to block an $8.5 billion acquisition Capri Holdings From the parent company of Coach and Kate Spade, tapestry.
The regulator’s move puts at least a temporary halt to a deal that would combine two of the major names in U.S. luxury retail and bring six fashion brands into one company: Tapestry’s Coach, Kate Spade and Stuart Weitzman and Capri’s Versace, Jimmy Choo and Michael Kors. The deal could allow luxury brands to better compete with European luxury brands such as Burberry and LVMH’s Louis Vuitton.
exist Press releaseThe FTC said the combined companies would harm shoppers and employees. Tapestry and Capri are said to “currently compete in everything from clothing to eyewear to shoes.”
“Tapestry aims to become a serial acquirer and seeks to acquire Capri to further solidify its position in the fashion industry,” Henry Liu, director of the FTC’s Bureau of Competition, said in the release. “This transaction could deprive consumers of affordable prices.” handbags, and hourly workers will lose the benefits of higher wages and more favorable working conditions.”
Tapestry believes the federal agency “fundamentally misunderstands the marketplace and how consumers shop.”
The company said in a statement that it must win the business of an increasing number of consumers who shop across brands, channels and price points.
“Most importantly, Tapestry and Capri face competitive pressure from both low- and high-priced products,” the company said. “In bringing this case, the FTC chose to ignore the reality of today’s dynamic and expanding global luxury goods industry, worth $200 billion.”
Capri echoed that argument in its own statement, saying consumers have “hundreds of handbag options at every price point across all channels, with low barriers to entry.”
Both Tapestry and Capri said they would fight the deal in court, with Tapestry saying it would “expeditiously complete the transaction in 2024.”
Tapestry announced the proposed acquisition in August. The transaction is expected to close in 2024. regulatory agency.
When Tapestry announced the deal, CEO Joanne Crevoiserat told CNBC that the combined company would be able to reach more customers around the world. The two companies will have combined annual revenues of more than $12 billion and operations in more than 75 countries.
Both Tapestry and Capri are under pressure as consumers continue to become more discerning about discretionary spending. However, Capri is particularly vulnerable because it relies more than Tapestry on department stores and other wholesale retailers.
Under Crevoiserat, Tapestry has raised awareness of the Coach brand, attracted younger shoppers and tried to rely on fashion and loyalty, rather than deep discounts, to drive higher sales and profits. The vast majority of Tapestry’s sales are through its own website and stores, with wholesale accounting for only about 10% of global sales in its most recently reported quarter.
Tapestry shares were up nearly 10% year to date as of Monday’s close, while Capri shares were down about 24% over the same period.
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