Week Six - Merger Blocks, Sales Slumps, Strategic Shifts
News in short
In New York last Thursday the highly-anticipated 8.5 billion USD merger between companies Tapestry and Capri Holdings was blocked. The Federal Trade Commission (FTC) filed a suit against the planned merger in an effort to keep healthy competition in the “accessible luxury” market, where bags are priced between 100-1000 USD. If the merger had gone through, three major market players – Coach, Kate Spade, and Michael Kors – would be owned by a singular parent company.
Capri, who owns Jimmy Choo and Versace as well as Michael Kors, had been experiencing declining sales and financial woes. The merger appeared as an answer to these issues which were instead exacerbated by Thursday’s ruling, with shares falling nearly 50% after the news broke.
Industry executives and market analysts alike were watching this deal with a close eye, as a successful Tapestry-Capri merger would present as an American solution to French luxury conglomerates LVMH and Kering. Tapestry is seeking to appeal Judge Rochon’s ruling, but the chances of success look extremely slim. Many industry insiders are afraid that this ruling will deter future healthy mergers or acquisitions in American fashion too.
Things are not looking well for Italian menswear group Zegna which saw a 7 percent drop in third-quarter sales as luxury demand softened in key markets, with revenues reaching €397 million. The steepest decline occurred in China, where revenue plummeted 22 percent during the summer.
Flagship brand Zegna experienced 2.5 percent organic growth, though other segments reported decreased sales. The group’s other brands didn’t face a more favorable position either, with Thom Browne’s quarterly sales plummeting 27 percent, even more than its 20 percent drop in the first half of the year. Moreover, Tom Ford Fashion, which recently changed designers, recorded an 11 percent decline as well.
Despite recent challenges, Zegna highlighted a positive performance during China's Golden Week in early October, with optimism for a stronger start in 2024. While revenue in EMEA and the Americas decreased by 2 and 3 percent, the APAC region, excluding Greater China, achieved 7.4 percent year-on-year growth.
Following a period of rapid expansion supported by the New York IPO, Zegna is now focusing on heritage and targeting specific customer profiles. The brand aims to strengthen its most beloved Tom Ford and Thom Browne items, alongside its flagship Zegna brand, which successfully switched to elevated casual wear after the pandemic.
The French couture giant Dior has recently announced their new partnership with the Hindi film star Sonam Kapoor. This news comes as luxury executives eye India as a potential market for significant growth, where luxury goods spending by Indian consumers is expected to roughly triple by 2030, reaching €30 billion per year.
Kapoor is extremely popular within the Bollywood world, starring in many top-grossing blockbusters and leading India’s top grossing pictures ‘Neerja’. Kapoor has previously worked as a brand ambassador for L’Oreal and IWC Schaffhausen, but now turns her attention to Dior who describe her as ‘a multi-talented personality, actress, producer and fashion icon…who embodies the grace and elegance of Dior’.
Dior stated that this unique partnership continues their recent links with India, where many of their suppliers for embroidery and embellishment are based. This deal follows several links between the luxury-goods world and Indian actresses as executives not only target Indian consumers but also the South Asian diaspora.
领英推荐
The luxury fashion brand reported strong results for the first quarter of 2024 on Tuesday, April 23, building on the momentum of its successful 2023. This quarter, the company posted sales of 148 million euros, marking a 12% increase at constant exchange rates and an 11% rise on a reported basis.
?The company’s net revenue reached 307 million euros. Specifically, the expansion is particularly notable in the EMEA region accounting for 8% of the total first half net revenue and the Americas regions for 38%, demonstrating strong demand for the brand’s products worldwide. Was it because Taylor Swift was spotted with a pair of “Hi Stars” that now everybody wants?
The luxury group Hermès announced on Thursday an 11.3% increase in its sales in the third quarter, challenging the sector's slowdown that has affected its main competitors. The creator of the Birkin bags has generated 3.7 billion euros in revenue for the three months up to September.
Hermès handbags, which costs at least around 10,000 euros, are accessible only to the wealthiest customers – who are generally less vulnerable to economic conditions. "This report should serve as a reminder that luxury consumers are still there and are spending on highly desirable brands with a strong pricing structure" noted JPMorgan analysts in a report. Hermès' stocks have risen about 9% since the beginning of the year, while LVMH’s stock has dropped by about 15% over the same period and Kering's has fallen by 40%.
Contrarily to Hermès, Kering has issued its third profit warning of the year after reporting a sharp 16% drop in Q3 sales, with flagship brand Gucci down 25%. The luxury conglomerate now looks to a strategic reset to counter sector-wide declines, particularly in China and Western markets, where consumer spending remains muted.
Under new leadership from CEO Stefano Cantino and designer Sabato De Sarno, Gucci is doubling down on revitalized core products to regain appeal. Three new handbag lines—the "Emblem," "Blondie," and "B Bag"—were launched to reconnect with Gucci’s heritage while targeting core luxury buyers. While these items bring new energy, the approach remains focused on “carry-over” classics and more accessible yet iconic styles, aiming to strengthen Gucci’s image without compromising quality.
To streamline operations, Kering will close underperforming stores, particularly smaller Gucci locations in Greater China, while maintaining a strong presence in major cities. The group reassures investors that marketing and promotional budgets will remain intact, ensuring that brand momentum is supported through this transition. As Kering navigates this challenging landscape, its strategy underscores a commitment to recalibrating for stability while pursuing long-term growth across its brands.
Tune in next time for more!
Yours,
The Debrief Team
BS4F, active since 2013, is one of the leading fashion associations with the mission of bringing students closer to their professional career aspirations in the fashion and luxury world.