Two aging French billionaires are at the top of the global luxury market: Bernard Arnault and François Pinault.
Arnault, 74, is the second richest man in the world with a personal fortune of around $218 billion (£170.5 billion). He presides over an empire spanning Louis Vuitton bags, Tiffany diamonds and Moet champagne at LVMH.
Pinault, 86, It is dominated by Gucci, Balenciaga, Yves Saint Laurent and Alexander McQueen and through his own group, Kering.
The couple have spent their lives building kingdoms that have helped establish Paris as the capital of luxury. Both men are preparing to hand their legacy to the next generation, and both LVMH and Kering are likely to remain under family control.
However, the couple is suddenly faced with a surprising challenge: the first truly American luxury collection.
On Thursday, New York-based Tapestry – owner of Coach and Kate Spade bags – announced an $8.5 billion (£6.7 billion) deal to buy Capri Holdings, the parent company of Jimmy Choo, Michael Kors and Versace.
The deal, spearheaded by Tapestry CEO Joanne Krewezirat, turns the company into a major force in the industry with heavyweights to compete with in Europe.
Crevoiserat, the former chief operating officer of Abercrombie & Fitch, joined Tapestry in 2019, shortly after its share price plunged amid disappointing sales.
She helped stabilize the ship but now she’s in for a big adventure with the Capri deal.
Krevoisrat, who also serves on the board of directors for General Motors and has worked at Wal-Mart, said the acquisition would create a “new, powerful global luxury home,” indicating ambitions to rival Europe’s biggest names.
However, shares in Tapestry fell about 16 percent after the debt-financed deal was announced, amid fears of slowing sales at home.
says Jonathan de Mello, founder and CEO of retail consulting firm JDM Retail.
“This could really mean facing LVMH and Kering in their own backyards.”
The company said this week that Capri sales fell 9.6 percent in the quarter ending July 1. Meanwhile, rival Ralph Lauren said North American revenue fell 10%, signaling an industry-wide downturn.
The slowdown comes after years of booming sales. Luxury goods sales hit €345bn (£298bn) in 2022According to Bain & Company. The market is expected to be worth €570bn (£491bn) by 2030. The fact that Bain offers its estimates in euros tells us so.
Tapestry and Capri Holdings had combined sales of $12 billion last year.
However, the amount pales in comparison to its European competitors. LVMH transferred €79.2bn (£68.5bn) in 2022.
Meanwhile, Kering, which also owns Yves Saint Laurent, has reported sales of €20.3bn (£18bn) in 2022. The company recently signed a record deal to open a new Yves Saint Laurent store on London’s Bond Street, agreeing to Pay sterling. 13m for a six-storey property. Last month, it acquired a 30 per cent stake in Italian fashion house Valentino for €1.7bn (£1.47bn).
In addition to the large scale, LVMH and Kering have prestige and reputation on their side.
“The Arnault family is steeped in luxury,” says Neil Saunders, managing director, Globaldata Retail. “They really understand business in a very deep way. If you look at them and you don’t realize they’re family, and you look at them as a management group, you’d say that’s a really good board you have there.”
Saunders argues that many of Tapestry’s brands are not high-end enough to rival those owned by LVMH and Kering. A Coach bag costs around £450, compared to more than £1,400 for a Louis Vuitton bag.
“(The Tapestry and Capri brands) are more like mass-market caps, whereas in a lot of European homes, while they do have some mass-market brands, they’re more of a rare kind of luxury, true luxury brands that do,” says Saunders. of the highest quality.”
“It’s a bit like a Corvette trying to compete with a Ferrari,” said retail consultant Andrew Busby.
“Although Capri has great brands in terms of Jimmy Choo, Versace, etc., they are quite niche.
“You look at some of the LVMH brands, and they’ve been around for a long time, and they have a different kind of appeal to people.
“In my view, an American-owned[company]will never be able to compete.”
Rather than dreading the competition, Paris might view the Tapestry deal as simply an acknowledgment of her massive success.
Saunders says: “I think this has more to do with Tapestry wanting to emulate what they (LVMH and Kering) do in terms of their business model, which is to have a house of brands that appeal to different segments in slightly different ways and manage them centrally, so you can reduce costs and expand.
“It’s almost like a form of flattery.”
He thinks more accessible brands in the US like Ralph Lauren and Tory Burch should be more concerned about increasing competition from Tapestry thanks to their new size.
“Looking more specifically at the accessible luxury goods market, Tapestry and Capri are creating a player that is far ahead of its largely independent and mostly private European peers,” adds Luca Solka, Bernstein’s senior global luxury research analyst. “I do not expect any material impacts on the global luxury goods industry.”
In any case, Crevoiserat hopes that bringing the Tapestry and Capri brands under one roof will help boost sales even as the US market loses momentum.
“Maybe the standout region for growth is Asia,” says Saunders. “Travel is resuming, people are returning to offices. So they are buying more clothes and more goods for these purposes.”