"},"content":{"rendered":"<\/p>\n
<\/p>\n
John D. Idol, CEO of Capri holdings<\/strong><\/b>, was the first to testify in Manhattan, on September 9, at the launch of the antitrust trial<\/strong><\/b> that will be decisive for the future of his group, its current competitor Tapestry<\/strong><\/b> and, to a certain extent, American luxury goods<\/strong><\/b>…<\/p>\n <\/p>\n The hearing, which will be completed in two weeks’ time, will determine whether Tapestry’s takeover of Capri<\/strong><\/b> can go ahead or not…<\/p>\n <\/p>\n The FTC (Federal Trade Commission)<\/strong><\/b> is opposed to Tapestry’s planned<\/strong><\/b> $8.5 billion acquisition of Capri<\/strong><\/b>, which they announced in the summer of 2023.<\/p>\n <\/p>\n The American antitrust authorities fear that the combination of Tapestry’s respective brands -Coach, Kate Spade and Stuart Weitzman- and Capri’s -Michael Kors, Versace and Jimmy Choo-<\/strong><\/b> could lead to a dominant position in accessible luxury<\/strong><\/b>, detrimental to consumers and employees.<\/p>\n <\/p>\n Capri CEO John D. Idol announced his \u201cintention to vigorously defend this case in court alongside Tapestry\u201d.<\/p>\n <\/p>\n <\/p>\n As the trial got underway, the parties were able to present their respective arguments<\/strong><\/b> to Judge Jennifer Rochon<\/strong><\/b> during opening arguments<\/strong><\/b>. This is the first antitrust trial for Judge Rochon, who was appointed by Jo Biden<\/strong><\/b> and took office in 2022.<\/p>\n\n <\/p>\n John D. Idol (Capri) emphasized that this merger would restore color to Michael Kors,<\/strong><\/b> an \u201ciconic but struggling House\u201d. He recalled the glorious year in 2016,<\/strong><\/b> when one in seven women wore a Michael Kors bag on New York’s Fifth Avenue<\/strong><\/b> and the brand posted sales of $4.7 billion.<\/strong><\/b><\/p>\n <\/p>\n Since then, faced with competition from European luxury brands <\/strong><\/b>and entry-level bags, the brand has lost considerable ground<\/strong><\/b>, with sales down to $3.5 billion<\/strong><\/b> in fiscal 2023-24 (ending March). And on days when John D. Idol sees one woman in 200 wearing a Michael Kors bag, he considers himself \u201clucky\u201d.<\/p>\n <\/p>\n <\/p>\n Beyond the case of Michael Kors alone, the creation of the new group would give new impetus to its various Houses<\/strong><\/b> at a time when the luxury goods market, and the American market in particular, are facing headwinds.<\/p>\n <\/p>\n For its part, the FTC has asked<\/strong><\/b> the judge to impose a preliminary injunction on the takeover.<\/strong><\/b> This would freeze the operation pending the Federal Commission’s trial and appeal. Since the latter could take months or even years, the merger project would be nipped in the bud.<\/strong><\/b><\/p>\n <\/p>\n Why is the FTC so relentless in its opposition to this project, which would nonetheless give American luxury a Champion<\/strong><\/b>, albeit one nowhere near the size of the sector’s Number One?<\/p>\n <\/p>\n <\/p>\n According to research firm GlobalData, the merger would create the fourth-largest luxury goods group in the world, and the second-largest in America<\/strong><\/b>, far behind Lvmh. Its combined sales would exceed $12 billion<\/strong><\/b>… Lvmh, for its part, generated<\/strong><\/b> 86 billion euros ($95 billion) in 2023,<\/strong><\/b> but on a much broader perimeter than that of Fashion and Leather Goods alone.<\/p>\n <\/p>\n The new American player would employ over 33,000 people and be present in 75 countries.<\/strong><\/b><\/p>\n <\/p>\n Following the announcement of the deal, Joanne Crevoiserat, Tapestry’s CEO<\/strong><\/b>, saw \u201capowerful new global luxury house<\/strong><\/b>, offering a unique opportunity to deliver greater value to our customers, employees, environments and shareholders around the world\u201d.<\/p>\n <\/p>\n <\/p>\n But Nicole Lindquist, the FTC’s lawyer<\/strong><\/b>, doesn’t see things in the same light at all. In her opening statement on September 9, she argued that \u201c working- and middle-class women\u201d would be harmed by the merger<\/strong><\/b>, while, according to her, more than half of Coach and Michael Kors customers earn less than $75,000 a year.<\/p>\n <\/p>\n According to her estimate, the acquisition would bring together more than half the market for bags positioned in the affordable luxury segment.<\/strong><\/b> And it would threaten not only consumers, but also the jobs of employees at both companies.<\/p>\n <\/p>\n For Tapestry’s lawyer, Lawrence Buterman,<\/strong><\/b> this reasoning is \u201ccompletely disconnected from reality\u201d,<\/strong><\/b> citing competition from \u201chundreds and hundreds\u201d of brands<\/strong><\/b> on the American market, from new and used bags from premium and luxury brands \u201cto Trader Joe’s viral mini-tote for $2.99\u201d.<\/p>\n <\/p>\n <\/p>\n According to TD Cowen<\/strong><\/b> analysts, taking into account the most important brands, Coach today holds 11% and Michael Kors 9% of the US market for affordable luxury handbags<\/strong><\/b> (priced at an average of $150). They estimate the size of this market at between $10 and $15 billion.<\/p>\n <\/p>\n It remains to be seen which party will be the most convincing.<\/p>\n <\/p>\n According to Bloomberg, investors are betting on the successful completion of the Tapestry-Capri deal.<\/strong><\/b> On Monday September 9, the first day of the hearing, Capri shares<\/strong><\/b> closed up 5.1%<\/strong><\/b> at $36.55. Tapestry offered to buy out its rival for $57 per share.<\/p>\n <\/p>\n <\/p>\n The Capri-Tapestry deal is both a first and a last for the Biden administration.<\/strong><\/b> It is the very first antitrust case<\/strong><\/b> brought by FTC Chairwoman Lina Khan in the fashion industry.<\/strong><\/b><\/p>\n <\/p>\n But it will also be the very last judicial opposition to a merger project under Jo Biden’s tenure<\/strong><\/b>. Since taking office, the Democratic President has demonstrated his willingness to enforce antitrust laws severely.<\/strong><\/b><\/p>\n <\/p>\n A number of mergers in various sectors (IT, distribution, etc.)<\/strong><\/b> have thus found themselves in the FTC’s crosshairs.<\/strong><\/b> But the FTC did not always win the day:<\/strong><\/b> despite its opposition, Microsoft Corp. succeeded in buying video game developer Activision Blizzard Inc. for $69 billion. On the other hand, the FTC succeeded in blocking Illumina Inc’s takeover of Grail, both biotechnology start-ups.<\/p>\n <\/p>\nOpening arguments<\/h2>\n
Headwinds<\/h2>\n
An American luxury champion<\/h2>\n
A threat to consumers and employees?<\/h2>\n
A $10-15 billion market<\/h2>\n
A first in the fashion industry<\/h2>\n
\n
\n\t\t