Are Versace and Jimmy Choo up for sale?

Just weeks after a proposed merger between fashion giants Tapestry and Capri Holdings was upended, it appears the latter could be doing some spring cleaning among its portfolio. Speculation has begun circulating that Capri has put both Versace and Jimmy Choo up for sale, which would leave the luxury group with just Michael Kors under its umbrella.

Financial sources for WWD said Capri was working with Barclays to find buyers for the two brands. The process is believed to have only just begun, thus it remains unclear as to whether the two brands would be sold together or separately, if at all. The media outlet stated that a “data room” on the two businesses was being set up for potential buyers, with first indications of interest expected to come by Christmas.

The format of the sale is also unclear, however, it has been speculated that Barclays is mulling an auction that would require interested parties to submit offers over multiple rounds.

The future of Capri had been thrown into doubt earlier this year after an 8.5 billion dollar buyout from Tapestry had been blocked in an antitrust lawsuit by the Federal Trade Commission (FTC). Upon declaration of the decision, Capri shares dropped significantly in value and the merger deal was ultimately terminated.

Softening demand for luxury throws future into doubt

There has been evidence that confidence in the Michael Kors brand has been retained, however. In November, the group announced that its own chairman, John Idol, was to assume the role of chief executive officer for the New York label as part of “reorganisation plans and expense reduction initiatives”. Philippa Newman had also been promoted to chief product officer, after most recently serving as the brand’s president of accessories and footwear.

Such shifts had come on the back of a lacklustre sales period for Capri, which, for the second quarter of the year, reported a group revenue decline of 16.4 percent. Jimmy Choo was the only brand in the Capri portfolio to post an increase, with revenue up 6.1 percent over the quarter. Versace and Michael Kors, meanwhile, reported drops of 28.2 percent and 16 percent, respectively.

A global softening of demand for luxury goods was cited as the cause for the revenue drops, an argument designer Michael Kors himself had underlined during court proceedings associated with the Capri and Tapestry merger. When called to the stand, Kors argued that the industry had “reached the point of brand fatigue”, further admitting that his own brand had fallen in favour among consumers.

Yet, while optimism seems to have remained low, there does still seem to be somewhat of an interest from investors in Capri. Oddo BHF Asset Management firm snapped up 610,000 shares in the fashion giant valued at approximately 25.9 million dollars, according to a recent filing with the SEC. Similarly, Geode Capital Management LLC upped its shares of the group in the third quarter of the year by 2.2 percent, now owning around 82.4 million dollars worth of shares in the company.