On Tuesday, Michael Kors announced that it will be buying Versace for $2.1 Billion. Versace was one of the last independent Italian brands, meaning they stood alone as a luxury fashion brand. Michael Kors will rename themselves as “Capri Holdings” as part of the deal. The brand will still remain under the name “Michael Kors”.
An article by CNBC states that Kors intends to grow Versace by $2 Billion and increase the amount of retail stores Versace has around the world, from 200 to 300. Kors also plans to increase the revenue from Versace accessories and shoes from 35 percent of sales to 60 percent.
After the 1997 murder of Gianni Versace, the brand’s founder, his sister Donnatella took over. Donatella will remain on the label to oversee changes, and will also be a shareholder in Capri Holdings. She is optimistic about the change. "We are all very excited to join a group led by [Michael Kors’ CEO] John Idol, whom I have always admired as a visionary as well as a strong and passionate leader. We believe that being part of this group is essential to Versace's long-term success," Donnatella told CNBC.
Michael Kors’ reason for buying the Italian brand seems to be their growing interest in the European market. CNBC explains that Kors wants to decrease their business in the U.S from 66 to 57 percent, and increase it in Europe from 23 to 24 percent.
Fans of Versace have already been speaking out against this deal. Some believe that Kors’ purchase of Versace will diminish the luxury of the brand, pointing out that Versace handbags cost $2,000, while Michael Kors bags cost around $100, according to Business Insider. Some even believe that Kors will “kill” the brand. Others make the point that Versace is an Italian brand, and needs to stay true to its roots in Europe. They fear that will change when the American brand takes over. A fan tweeted “Kors buying Versace removes so much of its appeal. Michael Kors is luxury but Versace is elegance and high-class. Clothes and accessories that speak for you. What does it become once it's owned by another entity.”
Business Insider reveals more of the negative backlash, with some believing that Donatella is disrespecting her late brother Gianni with the deal, stating that “Gianni didn’t die for his brand to be bought by Michael Kors.”
The Michael Kors brand stands up for themselves against such backlash. CNN makes an interesting point, that Versace is not as easily accessible. The high-end luxury brand has few stores around the world, and Kors hopes to improve that, while raising their revenue to $2 billion long-term. Kors executive chief, John Idol, told Business Insider he believes they “have a huge opportunity in accessories.” He said, “The company has an amazing women’s business. The customer is already buying our ready-to-wear. She’s already there.” Mr. Idol even characterized the Versace brand as “terribly underdeveloped.”
This isn’t the first time Kors has bought a luxury European brand. Last July, Kors bought Jimmy Choo for $1.2 billion and Michael Kors now has a one-up in the European fashion industry, while still widely dominating in the United States. This exchange grew Jimmy Choo’s sales to $1 billion.