• Coach owner Tapestry is buying Capri Holdings, the parent company of Michael Kors, for $8.5 billion.
  • This represents one of the biggest acquisitions in the fashion industry in recent years.
  • The new deal gives Tapestry greater influence in the luxury market and could bolster growth internationally.

Tapestry, the fashion company that owns Coach and Kate Spade, announced early Thursday that it will acquire Capri Holdings for $8.5 billion. 

Capri is the parent company of well-known fashion brands Michael Kors, Versace, and Jimmy Choo. 

This new deal represents one of the biggest acquisitions in the fashion industry in recent years, creating a combined company with annual revenues of $12 billion. And it could give Tapestry greater influence in the luxury market to take on European powerhouses LVMH and Kering, which own a string of luxury brands including Louis Vuitton, Tiffany’s, and Gucci. 

The deal comes as the American “aspirational” shopper comes under increasing pressure and their luxury spending slows. By teaming up, these brands are in a better position to grow sales outside of the US and reach a new customer base, GlobalData Retail analyst Neil Saunders said in a note to clients on Wednesday.

“There is more security in embarking on bold international plans as a larger entity,” he said.

“The logic behind any deal is to emulate groups like LVMH and Kering, which are highly successful at nurturing brands that appeal to different segments of the market. The large luxury houses also have a vast pool of common management and operational capacity that they can use across their brands in an efficient and effective way,” he added.

By acquiring Capri, Tapestry will add three well-known luxury brands to its roster. But it’s not an entirely rosy picture. All three brands saw revenues decline in the most recent quarters – and Michael Kors, Capri’s largest brand, has struggled for some time after falling into a discounting trap that ultimately devalued its brand image and killed desirability for its products.