Capri Puts Versace and Jimmy Choo Up for Sale: Sources

Capri Holdings, the parent company of luxury brands Versace and Jimmy Choo, is exploring the sale of these iconic labels, according to financial sources. The company, which also owns Michael Kors, is working with Barclays to find potential buyers for the businesses. Neither Capri nor Barclays have commented on the matter, and the process is still in its early stages, with no guarantee that the brands will be sold together or separately.

The decision to put Versace and Jimmy Choo up for sale comes after Capri's failed $8.5 billion buyout by Tapestry Inc., which was blocked by an antitrust challenge from the government. Capri's stock has since lost significant value, closing down 1.2 percent to $21.36 on Friday. Michael Kors, Capri's largest business, has been struggling with a 13.8 percent revenue drop in Q1 2024, and selling off the other divisions would give Capri time and resources to focus on turning around its core business.

Capri has previously considered spinning off its luxury divisions, with Barclays bankers suggesting in late 2022 that there were only a "limited number" of buyers for Capri and less strategic interest in acquiring Versace and Jimmy Choo together. Now, with the sale process underway, potential buyers could include luxury conglomerates like LVMH or Kering, seeking to expand their brand portfolio. Synergies could include increased global reach, cost savings through shared resources, and complementary product offerings.

The sale of Versace and Jimmy Choo could significantly impact Capri's revenue streams and profit margins. In 2023, Versace contributed $420 million, and Jimmy Choo $313 million to Capri's total revenue of $5.4 billion. Their sale could lead to a 13 percent reduction in Capri's revenue. However, profit margins might improve as Capri focuses on turning around its largest business, Michael Kors, which has been struggling with a 13.8 percent sales drop in Q1 2024. By selling Versace and Jimmy Choo, Capri can allocate more resources to Michael Kors, potentially enhancing overall profit margins.

The sale process is expected to involve an auction, with potential buyers receiving access to data on the brands and management as they refine their offers. While a buyer could swoop in and cut a deal, it's possible that Barclays ends up running an auction process with multiple rounds of bidding. The outcome of the sale will depend on factors such as the final sale price, the identity of the buyer(s), and the strategic direction Capri takes with the remaining assets.

In conclusion, Capri's decision to put Versace and Jimmy Choo up for sale is a strategic move to focus resources on turning around its core business, Michael Kors. The sale process is still in its early stages, and potential buyers could include luxury conglomerates seeking to expand their brand portfolio. The sale could significantly impact Capri's revenue streams and profit margins, but it also presents an opportunity for Capri to allocate more resources to Michael Kors, potentially enhancing overall profit margins. The outcome of the sale will depend on various factors, and investors should closely monitor the developments in this process.