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Michael Kors buys Jimmy Choo: The ticket to success?

Michael Kors buys Jimmy Choo: The ticket to success?

By Anusha Bhagat

British high fashion house Jimmy Choo has been bought by US-based Michael Kors Holdings in a deal which values the firm at $1.2 billion. The company, J. Choo Limited, was founded in 1996 by couture shoe designer Jimmy Choo and Vogue Accessories Editor, Tamara Mellon OBE. It is known for its luxury shoes, handbags, accessories and fragrances. In 2014, Jimmy Choo was listed on the London Stock Exchange. By this time, JAB, owned by the German billionaire Reimann family, was the main shareholder. JAB holdings, who is backing this deal, put the company up for sale in April’17.

A desperate bid to sell, sell and sell!

Many retailers have faced declining sales in recent years amid fierce competition from e-commerce websites like Amazon and high street fashion houses like H&M and Zara. In an attempt to boost sales, Michael Kors also strategized to offer heavy discounts and widely distribute its merchandise. Yet, sales took a significant back seat, declining by 11% in the latest quarter, and investors wiped away a third of the stock’s value in the last year. Michael Kors is still undergoing the process of closing down 100-125 of its standalone stores and renovating another 100 stores. It has also struggled to maintain its brand image after broadly distributing its products in discount stores and outlet malls.

A better tomorrow for MK

BBC reported that Michael Kors expects the acquisition to deliver a number of benefits, including “the opportunity to grow Jimmy Choo sales to one billion dollars” and acquire “a more balanced portfolio with greater product diversification”. The brand maintains that Jimmy Choo would also have the opportunity to grow in the men’s luxury footwear category, as well as gain greater exposure to global markets, “particularly the fast-growing market in Asia”.

Not only will acquiring Jimmy Choo lead to larger sales, it will also help Michael Kors add another feather to its cap-a flourishing luxury footwear line, in addition to its primary business of bags and accessories. This deal gives Michael Kors a new platform to attract customers from different markets.

The road ahead

The New York Times reported that Michael Kors expects to open new Jimmy Choo retail stores and expand its fashion offerings. It also plans to develop Jimmy Choo’s online presence, part of an attempt to win over fickle consumers and fend off the threat posed by Amazon.

Michael Kors followed the trend after Coach bought Kate Spade New York for $2.4 billion. Following the news of the acquisition, shares of Michael Kors went up by 1% in pre-market trading, while shares of Jimmy Choo surged by a respectable 17% in London. The two companies have stated that Jimmy Choo’s current management of CEO Pierre Denis and creative director Sandra Choi will remain in charge of their business. The deal is expected to close during the fourth calendar quarter of 2017.

Featured Image Source: Flickr

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