Tapestry cancels $8.5bn Capri merger following FTC roadblock

In a seismic shift for the U.S. luxury market, Tapestry Inc. has terminated its ambitious $8.5 billion acquisition of Capri Holdings, a bid that would have united six iconic brands under a single American luxury conglomerate. The announcement comes on the heels of a significant regulatory roadblock imposed by the U.S. Federal Trade Commission (FTC), which raised concerns about potential anti-competitive practices and limited consumer choice in the luxury handbag market. Tapestry, the parent company of Coach, had intended to strengthen its portfolio with Capri’s renowned brands, including Michael Kors, Versace, and Jimmy Choo. However, FTC intervention has left the luxury powerhouse expansion off the table, ending an attempt to counterbalance the dominance of European giants like LVMH and Kering.

FTC blocks Tapestry and Capri merger on antitrust grounds

In what had been touted as a “transformative deal” for the American luxury sector, Tapestry and Capri’s merger was poised to create a formidable competitor capable of challenging European powerhouses. The proposed alliance of Tapestry’s Coach, Kate Spade, and Stuart Weitzman with Capri’s Michael Kors, Versace, and Jimmy Choo would have created a unified portfolio of accessible luxury brands with significant reach across the U.S. and international markets. However, the FTC filed a lawsuit earlier this year, citing concerns that the merger would reduce competition in the accessible luxury segment, potentially leading to higher prices and fewer choices for consumers. The commission pointed to the significant overlap in the luxury handbag segment as a risk to fair competition, as well as potential repercussions on employee wages and benefits, which could have been impacted by the consolidation.

FTC chairperson Lina Khan indicated that the commission believed the merger would lessen competition in a market that is already highly concentrated. In October 2024, a U.S. District Court upheld the FTC’s position, granting a preliminary injunction to halt the merger. The judge’s decision effectively stalled the merger’s progress and signaled the beginning of the end for Tapestry’s high-stakes acquisition plans.

Tapestry and Capri pivot strategies after merger fallout

After months of regulatory scrutiny, Tapestry officially called off the acquisition, with CEO Joanne Crevoiserat affirming the company’s commitment to growth independently. Crevoiserat stated that Tapestry would move forward with strategies focused on enhancing organic growth within its existing brands, reinforcing Tapestry’s goal to expand its reach and elevate its brand offerings without a merger. Capri Holdings, led by Chairman and CEO John D. Idol, also acknowledged the termination, emphasizing that Capri remains committed to strengthening its current portfolio. Idol remarked that the company would now focus on driving growth for Michael Kors, Versace, and Jimmy Choo through strategies tailored to each brand’s distinct market positioning and global appeal.

The abrupt end of the Tapestry-Capri deal reflects the intense scrutiny now facing high-profile acquisitions within the U.S. luxury industry. With regulators casting a watchful eye on anti-competitive risks, the luxury sector’s appetite for acquisitions could be tempered by new legal hurdles, shaping the trajectory of future deals.

Investor sentiment and market reactions

News of the terminated merger had immediate effects on both companies’ stock performance. Tapestry’s stock saw a jump of 6.8%, buoyed by investors’ confidence in the company’s ability to thrive without Capri’s brands. Meanwhile, Capri Holdings experienced a 4% dip, reflecting market uncertainties surrounding its future growth trajectory as a standalone entity. In a bid to reassure investors, Tapestry also announced a $2 billion share repurchase program, aimed at returning value to shareholders and underscoring the company’s confidence in its independent growth prospects.

Expert perspectives on the failed luxury merger

Industry experts have weighed in on the implications of the failed merger. Some analysts believe that Tapestry may have dodged a potential misstep, as the $8.5 billion price tag for Capri raised questions about the value it would bring to Tapestry’s portfolio. Experts point out that, despite Capri’s iconic brands, the company has struggled with declining revenues and brand challenges. Capri’s top brands, Michael Kors and Versace, have encountered mixed results in recent years, with fluctuating sales and brand positioning struggles. In this context, Tapestry’s decision to refocus on its organic growth strategy could prove more financially prudent, allowing it to leverage resources more effectively.

However, Capri may face a tougher road ahead, with analysts suggesting that the luxury group could consider restructuring options or asset divestitures to strengthen its financial footing. Some industry watchers expect Capri to focus heavily on brand revitalization efforts, especially for Michael Kors, as the brand competes with a shifting market landscape and growing interest in European luxury goods. As the U.S. luxury landscape grows more competitive, Capri may need to implement innovative strategies to remain relevant and capture market share.

The road ahead for American luxury brands

The halted merger between Tapestry and Capri has underscored the challenges facing American luxury brands in competing with Europe’s established fashion titans. The outcome of this high-profile case also sends a strong message to the luxury industry: regulatory bodies are poised to scrutinize mergers that may stifle competition, even within niche segments like luxury handbags and accessible fashion. As both companies forge ahead independently, Tapestry and Capri will likely reassess their positions in the competitive luxury landscape, exploring strategies to captivate consumers and gain an edge in a complex global market.