Versace and Michael Kors couldn't be any more different, but here's why the deal works
Today, fashion company Michael Kors Holdings Limited ($NYSE:KORS), soon to be called Capri Holdings Limited, bought out fashion house Versace for €1.83 billion (est. $2.12 billion). With the deal, the holding company owns the eponymous Micheal Kors brand, Versace, and Jimmy Choo, which it acquired in 2017.
Not everyone is happy with the move, however. Some Versace fans are outraged that the "high-class" fashion empire built by the late Gianni Versace is going under the Kors umbrella.
The discount difference
While we at Thinknum have zero say in fashion trends — in our eyes, all data is beautiful on the inside —we do see a definite difference in Michael Kors and Versace products when it comes to the numbers. Specifically when looking at how often and how much these two brands are discounted on Dillards.com, a department store chain website, over the past month from August 22 to September 22, Versace products are discounted by a very small percentage, if at all.
Towards the end of August, the average discount on Versace products fluctuated from 1% to 7%. By the end of September, however, discounts for Versace flatlined, coming in as low as 1.83% when it wasn't at absolute zero.
As for Michael Kors, its average product has been discounted by at least 10% for the past month, which is more than what the average Versace product was discounted during the same period. At one point on September 21, the average Michael Kors discount climbed to as much as nearly 27%.
There are many reasons for a high average discount for company; too much supply, brand perception, or competition. All point towards Versace being a brand that does not count on discounts to sell more products, but rather the company's prestige.
Although looking at each designer's average discounts paints a picture of the average consumer's concern, the success of this merger is probably not going to be based on how little a Michael Kors handbag costs compared to what a Versace clutch will set someone back.
Kors workforce growth and culture
When it comes to a company's health, one prime place to look is its workforce. At Michael Kors Holdings Limited — or Capri Holdings Limited now — they are hiring more than they have in the past two years.
Those who already work for the fashion holding company gave it on par reviews anonymously on Glassdoor, rating it 3.4/5 on average and giving its CEO John D. Idol a 76% approval rating as of September 24. That rating has been on the decline since we started tracking it in June 2017, where it was once a full 8 percentage points higher.
Although employees are more skeptical than optimistic about the company's business outlook, or where it will be six months from now, the number of positive reviews for its outlook is growing after hitting its lowest point ever in mid-July. Since dropping to 38%, the company's business outlook improved 2% over the past two months, although there is no guarantee this will continue to grow with this new acquisition.
A global footprint
According to its press release, one of Capri's goals for Versace is to increase its brick-and-mortar presence from 200 to 300 stores. Currently, Michael Kors has 578 standalone stores listed as open around the world, including 342 locations in the United States. That doesn't count the department stores and other retail locations that carry Michael Kors products, which increases the brands' footprint to several thousand locations.
With the Versace acquisition, Capri Holdings will diversify its overall footprint to reach more markets in Europe and Asia, with the latter having a severe lack of Michael Kors storefronts. Furthermore, with plans to expand Versace on the ground, it could open up more markets in major American cities that already have shown success for its original fashion house.