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NEW YORK, United States — Capri Holdings, the parent of Mickael Kors, Versace and Jimmy Choo, has agreed to acquire Italian footwear factory Alberto Gozzi S.r.L., located in Pistoia, Tuscany. The factory has been family-owned since its founding in 1974.
The deal is expected to close in the first three months of 2020, and the factory will begin to produce Jimmy Choo and Versace styles before adding production of the higher-end Michael Kors Collection at a later point, a representative for Capri told BoF.
The deal marks the first factory acquisition for the newly formed Capri group, which is likely seeking to own more of its supply chain as a way to be competitive in an increasingly consolidated luxury goods market dominated by French groups LVMH and Kering. One way to battle the conglomerates — which box out competitors from prime space at multi-brand retailers, deals with manufacturers and leases in top real estate — is to become a more vertically integrated business.
“We are excited to welcome all of Gozzi’s talented craftsmen to the Capri Holdings Group,” Chairman and Chief Executive of Capri John Idol said in a statement. “This acquisition allows us to further align with the industry’s best practices and to strengthen our technical competencies while cementing our position in the global luxury market.”
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Idol has major ambitions to turn Capri into a strong enough pure-luxury business to stand alongside the European leaders, but he has a long and complex road ahead of him.
All of Capri's brands are underpenetrated, both in e-commerce and in China, the most important market for luxury, and where Versace has seen comparable sales decrease.
Plus, Michael Kors still counts on entry-level product for a significant amount of its revenue. The company is trying to bring the brand further upmarket, which is challenging to do given its masstige status.
Both Versace, which Capri acquired in September 2018 for $2.1 billion, and Jimmy Choo need investment in the form of an expanded retail network and manufacturing capabilities.
The Gozzi factory will aid in that effort, especially because footwear is a priority accessory for Versace and the market for handbags, another potential-growth category, is contracting. American retail research firm NPD Group reported a 20 percent decline in the women’s handbag business in the first 8 months of 2019 compared to three years prior.
In the most recent first quarter, Capri's total revenue grew 15 percent to $1.4 billion, but adjusted net income decreased 7.8 percent. Sales decreased at Michael Kors and were flat at Versace, while Jimmy Choo operated at a loss. Shares have dropped 24 percent since April.
Idol is very aware that his strategy for Capri will take time to execute, but investors may not be so patient.
“We felt that the luxury market will have the longest sustained growth over the next 20 to 30 years,” he told BoF in January 2019.
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