Michael Kors stole the show at Milan Fashion week this year but not for their fashion and rather their investment choices.
Michael Kors is the US fashion group best-known for their leather handbags and are listed under the ticker symbol KORS. They have made their ambition to grow their collection of high-end fashion brands very clear, as clear as the $2 billion they’re spending to buy Versace. This will give them more ability to grow in an industry still dominated by European players such as Louis Vuitton owner LVMH.
Versace is a Milan based label, so Milan fashion week was a symbolic setting to share the news, and well, Versace is known for being bold! In fact, Versace became a household name through bold and provocative designs like their 1994 dress that was so shocking it has its own Wikipedia page.
Versace are one of a clutch of family-owned Italian brands seen as attractive targets at a time when the luxury industry is benefiting from strong demand from China.
Founded in 1978 by Gianni Versace, Versace has been run by his family since he was murdered 21 years ago, you can read more about it here. Versace is not just run by but is also controlled by the Versace family who collectively own 80% of Versace with the remaining 20% owned by private equity firm Blackstone. As BAZAAR.com reported earlier, "The Versace family will become shareholders of Capri Holdings Limited, with Donatella keeping her role as creative director of the fashion house. Capri Holdings, formerly Michael Kors Holdings, now has three major fashion houses under its portfolio: Michael Kors Collection, Jimmy Choo, and Versace."
Gianni actually started in fashion design with an apprenticeship in his mother’s sewing businesses which employed up to a dozen seamstresses. It wasn’t long before he become known for his successful youthful fashion like ‘Byblos’ in 1973. His first fashion show came only a few years after this and his first boutique was open in Milan in 1978.
Growth Plans
Kors has big plans to grow their high-end fashion labels which saw them buy Jimmy Choo (the shoe icon for Sex and the City) last year for $1.35bn. In the middle of a year, post their acquisition of Jimmy Choo, Michael Kors Holdings Limited may have seen its stock market value slide by over 20%, but it’s since doubled in price compared to last year’s lows.
Now Kors aim to grow Versace's revenue from $808 million to $2 billion, expand from 200 to 300 stores, while developing their online presence. Farfetch, the listed UK company that’s the amazon of high fashion could help them with that! Read more about them here.
Understandably, this means that scaling the Versace name into new avenues of revenue is a possibility, but that likely won't include mass-retailers in the way Kors has expanded his ever-growing empire, or at least not immediately. It seems that Kors, now Capri Holdings Limited, is eager to expand predominantly into the luxury space, and much will be revealed when details of the acquisition are finalized and released.
While Donatella's loyal fanbase might not be as welcome to the change, she certainly seems to be excited for what the future may bring under Kors CEO, John D. Idol, and the Capri's collaboration and leadership. "We believe that being part of this group is essential to Versace’s long-term success," Donatella said. "My passion has never been stronger. This is the perfect time for our company, which puts creativity and innovation at the core of all of its actions, to grow.”
And grow they will! Last year, Michael Kors Inc. reported gross profits of $2.66 billion. Despite the flagship brand’s “affordable” image, Kors is full of savvy people who know how to run a fashion house. For investors, this is reflected in Kors’s stock price which is up 43.81% over the past year.
If Kors reach the financial objectives they’ve set for Versace, this could be both beneficial to their revenue growth and continued stock growth.
Maybe it’s time to stop buying into their fashion trends and by into their stock?
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
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