Michael Kors to Buy Jimmy Choo in $1.2 billion deal

Michael Kors has picked out some new shoes to go with its handbags. On Tuesday, Michael Kors Holdings said it had agreed to buy the luxury shoe company Jimmy Choo for 896 million pounds, or about $1.2 billion, the latest push by an American luxury conglomerate to find sources of growth in an increasingly competitive retail landscape. Many upscale brands are grappling with plummeting sales and tepid profits. Mall traffic in North America has declined sharply, and deep discounting tactics have resulted in luxury labels losing much of their luster with core customers.

To make matters worse, shoppers who have traditionally been loyal to the so-called middle market have gravitated toward brands at extremes of the style, and price, spectrum. That has benefited e-commerce giants like Amazon, fast-fashion brands like H&M and Zara, and luxury houses like Gucci. And it has left companies like Michael Kors — once the runaway leader of the “accessible luxury market” — exposed.
Michael Kors, known for fashion-forward designs and competitive prices, has been hit particularly hard after overreaching in a rapid expansion effort. In May, it downgraded its sales forecasts for the rest of the year, and said it would close as many as 125 of its full-price retail stores. Its share price has lost a fifth of its value in 2017.  The deal for Jimmy Choo, however, could give it a new avenue for growth. Michael Kors said it expected to open new Jimmy Choo retail stores and develop the brand’s online presence, and to expand the assortment of its fashion offerings.
The sale came almost three years after Jimmy Choo went public. The brand had put itself up for sale in April as the Reimann family, the reclusive German consumer goods billionaires who had owned it, looked to reduce their luxury holdings. Under the terms of the transaction with Michael Kors, Jimmy Choo investors would receive 230 pence for each share they own, representing a 36.5 premium to the share price in April before the company announced it was putting itself up for sale.