Versace acquisition prompts the question
When the news broke that Michael Kors Holdings paid $2.12 billion for Italian fashion brand Gianni Versace S.p.A., people were surprised at the price. Calling the offer “a rich one,” the Wall Street Journal reported the brand had generated only $17.5 million in profits last year.
Investment analyst Oliver Chen with Cowen and Company was more bullish about the deal. With estimated sales of $775 million in 2018 and expectations to reach an ambitious $850 million in 2019, Chen put the enterprise value on Versace at 2.5x and EBITDA around 13.9x, which on both counts are within the luxury sector averages for acquisitions since 2011.
Along with the Versace news, Kors also announced it will change its name to Capri Holdings Limited, upon closing the deal in the fourth quarter, after the famed Italian island “long recognized as an iconic, glamorous and luxury destination,” the press release stated.
This is the second of Kors major luxury acquisitions, following Jimmy Choo for $1.2 billion last year. At the time, Kors CEO John Idol told CNBC that “This will not be [Michael Kor’s] last acquisition.”
Idol said, “Acquiring Jimmy Choo is the beginning of a strategy that we have for building a luxury group that is really focused on international fashion brands.” He is keeping that promise.
As a result, obvious comparisons to global luxury-leading conglomerate LVMH come to mind.
With Versace’s management team of creative head Donatella Versace and CEO Jonathan Akeroyd continuing to lead, and likewise at Jimmy Choo, the Kors vision of collecting a family of luxury brands was described by Greg Furman, founder and chairman of the Luxury Marketing Council, as “LVMH-izing American luxury.”
Walmart Doubles Down On Its Transformation Into A Technology Company
At this past June's Walmart Associate and Shareholders Meeting, CEO Doug McMillon continually referred to Walmart as a “technology company.”
That had many people scratching their heads saying, in effect, Walmart is not Microsoft, Google or Amazon, for heaven’s sake. MIT Technology Review asked, “Walmart wants us to believe it’s turning into a tech company?”
Doubters need to step down. Walmart has partnered with two of those tech leaders – Microsoft for cloud computing and Google for voice-activated shopping – and made a number of acquisitions and investments to elevate its ecommerce platform, along with investments in in-store automation that will eventually enhance operations efficiency within its nearly 5,000 stores.
Walmart is executing on its digital transformation. Following Walmart’s October 16 Investor Community meeting, Oliver Chen, Cowen and Company analyst covering retail and luxury goods, came back convinced.
Discover Your Luxury Competitors' Strategies
Unity Marketing just wrapped a new survey among 600 luxury industry executives across a wide range of vertical sectors (e.g. fashion, jewelry, home furnishings, travel, hospitality, design) and companies that support the luxury industry in marketing, advertising and technology strategies.
It takes you behind the curtain to get a unique perspective on the luxury market from the point of view of those that compete in the luxury industry.
The study, conducted in partnership with Luxury Daily, the world’s largest luxury business publication, found that the industry’s biggest challenges and opportunities revolve around the same trend: the rise of the digital economy.