FTC sues to block Coach parent Tapestry’s acquisition of Capri Holdings

The
U.S.
Federal
Trade
Commission on
Monday
sued
to
block

the
$8.5
billion
acquisition
of


Capri
Holdings
by
Coach
and
Kate
Spade’s
parent
company,


Tapestry.

The
move
by
regulators
brings
at
least
a
temporary
halt
to
a
deal
that
would
marry
two
major
names
in
American
luxury
retail
and
put
six
fashion
brands
under
a
single
company:
Tapestry’s
Coach,
Kate
Spade
and
Stuart
Weitzman
and
Capri’s
Versace,
Jimmy
Choo
and
Michael
Kors. With
the
transaction,
the
luxury
brands
could
be
poised
to
better
compete
with
European
luxury
names,
such
as
Burberry
and
LVMH’s
Louis
Vuitton.

In
a
news
release,
the

FTC
said
the
combined
company
would
harm
shoppers
and
employees.
It
said
Tapestry
and
Capri
“currently
compete
on
everything
from
clothing
to
eyewear
to
shoes.”

“With
the
goal
to
become
a
serial
acquirer,
Tapestry
seeks
to
acquire
Capri
to
further
entrench
its
stronghold
in
the
fashion
industry,”
Henry
Liu,
director
of
the
FTC’s
Bureau
of
Competition,
said
in
the
release.
“This
deal
threatens
to
deprive
consumers
of
the
competition
for
affordable
handbags,
while
hourly
workers
stand
to
lose
the
benefits
of
higher
wages
and
more
favorable
workplace
conditions.”

Tapestry
argued
the
federal
agency
“fundamentally
misunderstands
both
the
marketplace
and
the
way
in
which
consumers
shop.”

In
a
statement,
the
company
said
it
must
win
the
business
of
consumers
who
increasingly
shop
across
brands,
channels
and
price
points.

“The
bottom
line
is
that
Tapestry
and
Capri
face
competitive
pressures
from
both
lower-
and
higher-priced
products,”
it
said.
“In
bringing
this
case,
the
FTC
has
chosen
to
ignore
the
reality
of
today’s
dynamic
and
expanding
$200
billion
global
luxury
industry.”

Capri
echoed
that
argument
in
its
own
statement,
saying
consumers
“have
hundreds
of
handbag
choices
at
every
price
point
across
all
channels,
and
barriers
to
entry
are
low.”

Tapestry
and
Capri
both
said
they
will
fight
for
the
transaction
in
court,
with
Tapestry
saying
it
will
work
“expeditiously
to
close
the
transaction
in
calendar
year
2024.”

Tapestry

announced
the
proposed
acquisition
in
August.
The
deal
had
been
expected
to
close
in
2024.
It
had
already
secured
approval
from
regulators
in
Europe
and
Japan,
according
to
a
financial
filing
by
the
company
earlier
this
month,
but
was
still
waiting
for
the
approval
of
U.S.
officials
—
the
only
regulator
still
outstanding.

When
Tapestry
unveiled
the
deal,
CEO
Joanne
Crevoiserat
told
CNBC
that
the
combined
companies
would
be
able
to
reach
more
customers
across
the
globe.
Together,
the
two
companies
would
have
over
$12
billion
in
annual
revenue
and
a
presence
in
more
than
75
countries.

Both
Tapestry
and
Capri
have
been
under
pressure,
as
consumers
continue
to
be
choosier
with
discretionary
spending.
Yet
Capri,
in
particular,
has
been
more
vulnerable
because
of
its
heavier
reliance
than
Tapestry
on
department
stores
and
other
wholesale
retailers.

Led
by
Crevoiserat,
Tapestry
has
raised
the
profile
of
Coach’s
brand,
attracted
younger
shoppers,
and
tried
to
lean
on
fashion
and
loyalty,
rather
than
deep
discounts,
to
drive
higher
sales
and
profits.
The
vast
majority
of
Tapestry’s
sales
are
through
its
own
website
and
stores,
with
wholesale
accounting
for
only
about
10%
of
sales
globally
in
the
most
recently
reported
fiscal
quarter.

As
of
Monday’s
close,
shares
of
Tapestry
are
up
nearly
10%
so
far
this
year
compared
with
the
stock
of
Capri,
which
has
fallen
about
24%
over
the
same
period.