On October 24, a U.S. judge blocked Tapestry, the parent company of Coach, from acquiring Capri Holdings, the parent company of Michael Kors, in an $8.5 billion deal. Following the ruling, Capri’s stock plummeted by 45% in early trading on the 25th, while Tapestry’s shares surged by 12%.
This decision represents a significant victory for the Federal Trade Commission (FTC), effectively quashing Tapestry’s plan to consolidate iconic brands like Coach, Michael Kors, Kate Spade, Versace, and Jimmy Choo under one umbrella. It also thwarted Tapestry’s strategy to create a U.S. competitor capable of rivaling European luxury giants like LVMH.
Tapestry announced its intention to acquire Capri in August of last year, but the FTC filed a lawsuit in April, arguing that the merger would suppress competition in the “affordable luxury handbag” market, potentially leading to higher prices and hurting budget-conscious consumers. Both Tapestry and Capri countered that the handbag market is fiercely competitive, with not just similar price point bags, but even higher-end brands introducing more affordable options.
After an eight-day hearing, U.S. District Judge Jeniffer Rochon of New York sided with the FTC, issuing a detailed 169-page ruling that referred to a “Torras” presence in the fashion industry. The ruling included a temporary restraining order to prevent the merger while the FTC pursues a permanent injunction in administrative court. Typically, when a federal judge issues an injunction, companies reconsider their merger plans.
The judge’s ruling also highlighted that the defendants overlooked the significance of handbags for many women, stating that they are not only a form of self-expression through fashion but also play a critical role in daily life.
In response to the temporary restraining order, Tapestry and Capri expressed disappointment and indicated plans to appeal. The FTC’s administrative trial is scheduled to begin on December 9.
Tapestry released a statement claiming that they face competitive pressure across various price ranges and continue to believe that the merger would enhance competition and benefit consumers.
FTC Bureau of Competition Director Henry Liu emphasized that the judge’s decision is “not just a win for the FTC, but a victory for consumers across the country seeking affordable luxury handbags.”
In related news, Hoka shoes, popularized by long-distance running enthusiasts, have seen remarkable sales success, boosting the performance of its parent company, Deckers Outdoor. The company reported an impressive quarterly performance, with projections indicating a 12% increase in revenue for the upcoming fiscal year. On the 25th, Deckers’ stock jumped nearly 13% in early trading.
Deckers, known for manufacturing Hoka shoes and Ugg boots, issued a statement from CEO Dave Powers, crediting strong consumer demand for innovative products as the driver behind last quarter’s outstanding results.
The company reported a quarterly profit of $242 million, or $1.59 per share, surpassing last year’s $179 million, or $1.14 per share, as well as exceeding analyst estimates of $1.24 per share from FactSet.
