Michael Kors Holdings will buy Jimmy Choo for 896 million pounds, or about $1.2 billion, the latest push by an American luxury company to find sources of growth in an increasingly competitive retail landscape. Many upscale retailers are grappling with plummeting sales and tepid profits. Mall traffic in North America has declined sharply, and deep discounting tactics have resulted in some luxury labels losing much of their luster with core customers. Michael Kors, known for fashion-forward designs and competitive prices, has been hit particularly hard after overreaching in a rapid expansion effort.
Jimmy ChooIn May downgraded its sales forecasts for the rest of the year, and said it would close as many as 125 of its full-price retail stores. Its share price has lost a fifth of its value in 2017. The deal for Jimmy Choo could give it a new avenue for growth.
Michael Kors is heavily reliant on the outlets and department stores that have been hammered by changing shopping habits, meaning its products are often heavily discounted. But Jimmy Choo is in a higher price bracket than Michael Kors, and it attracts a different range of customers, bringing hefty profit margins and an upmarket brand aura. After three cycles of private equity ownership, Jimmy Choobecame the first luxury footwear brand to list on a public market in 2014. Prices range from $425 for flat shoes to $1,795 for over-the-knee suede boots, while small clutch handbags start around $700, according to Jimmy Choo’s website.