In response to decreasing sales and rising competition, Michael Kors announced on Tuesday that it has agreed to purchase shoe brand Jimmy Choo for USD 1.2 billion to enhance its presence and profits in the retail market.
In a statement, Michael Kors, Honorary Chairman and Chief Creative Officer of Michael Kors, said, “Jimmy Choo is a premier fashion luxury house that offers distinctive footwear, handbags and other accessories. We admire the glamorous style and trendsetting nature of Jimmy Choo designs. We look forward to welcoming Jimmy Choo to our luxury group.”
This deal comes just months after Coach’s purchase of handbag brand Kate Spade for a reported USD 2.4 billion, and is expected to help Michael Kors compete with Coach and other luxury retail giants. Though Michael Kors is typically considered a middle-market brand that relies heavily on sales from outlets and department stores, Jimmy Choo’s reputation and positioning as a luxury shoe brand will enhance Michael Kors’ market position, overall competitiveness, and profits. It will also give the company access to Jimmy Choo’s consumer base, and is expected to boost Jimmy Choo’s sales to USD 1 billion.
Michael Kors also expects that the acquisition will give it greater access to the men’s luxury footwear category, and will allow it to continue its expansion in the luxury accessories market. Additionally, it will benefit from Jimmy Choo’s access to many fast-growing Asian markets, and gives both companies greater product diversification and a more balanced portfolio.
Said Pierre Denis, Chief Executive Officer of Jimmy Choo, said, “It is a privilege for our management team to lead Jimmy Choo and to preside over such an exciting period for our company. We are convinced that there is so much more that can be delivered in the years ahead. We look forward to working closely with the leadership and team at Michael Kors Holdings Limited to further develop our iconic brand.”
The deal has been approved by both boards of directors, and is scheduled to be finalized in the final quarter of this year. However, to become official it must first be approved by Jimmy Choo’s stakeholders, who make up about 75% of share capital.
In addition to this acquisition, Michael Kors announced in May that it will be closing up to 125 stores this year in order to refine its reach and improve its profit margins.
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