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Capri Share Price Plummets: Tapestry Deal with Versace and Michael Kors Parent Company Collapses

Immediate Loss of Almost One Fifth of Market Value

Shares in Capri Holdings, the parent company of luxury brands such as Versace and Michael Kors, have plunged by 18.5% after a proposed deal with Tapestry, the owner of Coach, collapsed. The news sent shockwaves through the fashion industry and raised questions about the future of both companies.

Deal Unraveled After Due Diligence Concerns

The deal, which was originally announced in January, would have seen Tapestry acquire Capri for $2.2 billion. However, according to a statement released by Tapestry, the company terminated the agreement after "conducting a more thorough review" of Capri's business. Tapestry cited concerns about Capri's ability to meet its financial projections and the impact of the COVID-19 pandemic on the luxury retail sector.

Capri's Future Uncertain

The collapse of the deal leaves Capri's future uncertain. The company has been struggling in recent years, with sales declining and profits falling. The loss of Tapestry as a potential buyer is a major blow, and it is unclear whether Capri will be able to find another partner. In a statement, Capri said it was "disappointed" by Tapestry's decision and that it would "continue to explore all strategic alternatives to enhance shareholder value.”

Analysts Question Tapestry's Strategy

The collapse of the deal has also raised questions about Tapestry's strategy. Some analysts believe that Tapestry overpaid for Coach in 2017 and that the company is now struggling to integrate the brand into its portfolio. The failed deal with Capri suggests that Tapestry may be having difficulty identifying and acquiring the right brands to drive growth.

Shares in Tapestry Also Fall

The collapse of the deal has also had a negative impact on Tapestry's share price. Shares in the company fell by 6.5% in after-hours trading following the announcement. The deal was seen as a way for Tapestry to diversify its portfolio and reduce its reliance on the Coach brand. With the deal now off the table, Tapestry's future strategy is less clear.

Conclusion

The collapse of the deal between Tapestry and Capri is a major blow to both companies. Capri's future is now uncertain, while Tapestry's strategy is under scrutiny. The deal's failure is also a reminder of the challenges facing the luxury retail sector in the wake of the COVID-19 pandemic.