Three weeks after a federal judge issued an injunction halting the merger of luxury groups Capri Holdings and Tapestry, the companies have mutually agreed to give up their plans to join forces. Both groups said that the outcome of the legal process was too uncertain and unlikely to be resolved by the outside date (or drop-dead date) of Feb. 10, 2025 that had been set when the merger was first announced in August 2023.
When the injunction was issued in late October, Tapestry said it planned to appeal, with both companies steadfastly maintaining that their merger was not monopolistic, as the Federal Trade Commission claimed, citing the “intensely competitive” and “highly fragmented” nature of the luxury handbag market. However, in the intervening weeks Capri and Tapestry have clearly decided that a prolonged legal battle would not be in either of their interests, particularly as the luxury market as a whole faces a marked slowdown that has put pressure on brands across the segment.
Instead, both Capri and Tapestry said they will now focus inward, with Capri outlining strategies for a return to growth and Tapestry announcing a $2 billion share repurchase program, saying that it believes “there is no better investment at this time than our own stock.”
“We have always had multiple paths to growth, and our decision today [to end the merger with Capri] clarifies the forward strategy,” said Joanne Crevoiserat, CEO of Tapestry in a statement. “Building on our successful first quarter, we will move with speed and boldness to accelerate growth for our organic business. Tapestry remains in a position of strength, with distinctive brands, an agile platform, passionate teams and robust cash flow. We are confident in our compelling long-term organic growth agenda and the opportunity to deliver enhanced value to all stakeholders for years to come.”
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In its Q1 for fiscal 2025, which ended Sept. 28, 2024, Tapestry outperformed expectations, with net sales of $1.51 billion, in line with the previous year and led by growth at the Coach brand. The company’s gross profit in the quarter also was up year-over-year to $1.13 billion.
The picture was a bit different at Capri, where revenue was down 16.4% to $1.08 billion in Q2 of fiscal 2025, which ended Sept. 28, 2024. Chairman and CEO of Capri Holdings John Idol cited a softening of global demand and said Thursday that “with the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses.
“Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons,” added Idol. “First, we have an incredible portfolio of luxury houses, each with their own rich heritage, exclusive DNA and strong consumer loyalty. Second, we have a solid distribution network to build upon. With over 1,200 directly operated luxury retail locations globally, combined with our robust digital platform, we have a strong framework for the future. Additionally, our extensive wholesale network serves as an important channel to reach consumers in areas where we do not have our own stores. Third, we have the management team, design talent and a global workforce of 15,000 employees to successfully execute our initiatives. Fourth, we have the financial strength to implement our strategies.
“Given our company’s performance over the past 18 months, we have recently started to implement a number of strategic initiatives to return our luxury houses to growth,” Idol continued. “Across Versace, Jimmy Choo and Michael Kors, we are focused on brand desirability through exciting communication, compelling product and omnichannel consumer experience.”
