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A dult women lining up to take selfies in front of a bright pink wall isn ’ t a typical activity for a Wednesday afternoon – unless you are at the Kate Spade store in Hudson Yards , a luxury shopping center in New York City .
Kate Spade , Stuart Weitzman and Coach sit under the Tapestry Inc umbrella . Walk into any of these retailers , and you will see the same type of customer : she is young , has disposable income and is ready to spend . While this demographic ’ s social media presence makes it seem like they are everywhere ( or more specifically , at a Taylor Swift Eras show ), their wallets and buying power are elusive and extremely coveted .
Chasing the high-end shopper This is what Joanne Crevoiserat , the CEO of Tapestry , identified as the primary reason for the recent acquisition of Capri Holdings ( the parent company of Versace , Jimmy Choo and Michael Kors ), during an interview on Yahoo ! Finance the morning the acquisition was announced .
“ We are playing in a $ 200 billion luxury market that includes handbags , shoes , accessories and apparel , and this acquisition deepens our access to higher-end luxury consumers that are quite resilient ,” she said with a confident tone and the faint twinkle of dollar signs in her eyes .
Retail merger and acquisition activity has increased as pandemic lockdowns have come to an end and market conditions point to a stronger economy and even stronger five-year outlook . In fact , the world of M & A is thriving despite inflation and rising interest rates driving up the cost of money .
At the time of this writing , the Tapestry- Capri deal is worth almost $ 15 billion . When you add in the deal premium and EBITDA , it ’ s just over $ 2.5 billion . Along with a large bet on the core customer , Crevoiserat sees the newly acquired luxury shopper as someone who wants to purchase , is sick of staying at home in sweats and on Zoom calls , and is willing to put her hardearned cash into looking good .
This notion is contrary to what the CFO of LVMH , Jean-Jacques Guiony , said on the company ’ s Q2 earnings call on July 25 – that the “ aspirational customer is suffering a bit , [ with ] lower sales online and in ‘ second-tier cities .’ ”
But go to those second-tier cities that Guiony refers to , specifically Atlanta , Austin , Charlotte , Dallas , Denver , Miami , Nashville and Raleigh , and you will see the customers Crevoiserat describes filling the stores , shopping and putting it on display for everyone to see in the form of YouTube haul videos and # BamaRush shorts on TikTok . They are wearing Zimmermann , Golden Goose and LoveShackFancy mixed with products that have lower price points .
Acquiring such brands means access to an immediate platform , built-in endorsements and an audience that has spending power . That combination , along with the potential to reach major markets outside of the US , is driving plenty of interest from luxury groups looking to add to their portfolios .
Battling brand dilution For heritage labels , this appetite for M & A is one way to address a long-term problem . Keeping a 200-year-old luxury brand relevant , specifically for a younger demographic , is more difficult than it seems , and heritage brands are starting to lose market share in the US . With brand equity tied up in logos and color palettes that feel old , and college-aged women opting for David Yurman instead of Tiffany , European parent companies are starting to panic . ►
September 2023 www . insideretail . us 15