British shoe brand Jimmy Choo has been snapped up by American fashion label Michael Kors in an £896 million deal.
Michael Kors said on Tuesday it has agreed to purchase the luxury shoemaker for approximately $1.2 billion, adding a coveted global brand to the U.S. retailer’s stable as its own handbag and accessories sales suffer.
Many retailers have faced declining sales in recent years amid fierce competition from online shopping and discount and fast-fashion stores like TJMaxx and H&M. In an attempt to woo shoppers, Michael Kors has offered heavy discounts, but has ended up giving people reason to pause before paying full price and diminishing the brand’s cachet.
Sales have taken a nosedive, declining 11% in the latest quarter, and investors have wiped away a third of the stock’s value in the last year. Michael Kors is in the process of closing 100 to 125 of its standalone stores, renovating another 100-plus stores and doubling down on more innovative designs. It also said it would rein in its discounting and sell fewer items to department stores, which are prone to marking down items in order to move inventory.
The acquisition will give Michael Kors a new avenue for international growth and a foothold in the luxury shoe market. “We admire the glamorous style and trend-setting nature of Jimmy Choo designs,” said Michael Kors, honorary chairman and chief creative officer, in a statement.
Jimmy Choo was started in 1996 by British Vogue editor Tamara Mellon and designer Jimmy Choo. Its stilettos, which often cost north of $1,000, quickly became a favorite among celebrities like Sarah Jessica Parker and Princess Diana.
The shoemaker put itself up for sale in April as Germany’s billionaire Reimann family, the largest owner through investment vehicle JAB Holding, attempts to shift its focus away from luxury goods. It is instead creating a food and beverage empire and has scooped up brands like Krispy Kreme, Peet’s Coffee & Tea’s and Caribou Coffee. It recently bought Panera for $7.5 billion. Michael Kors said the deal has the support of JAB.
Jimmy Choo will continue to be run by CEO Pierre Denis, who has held the top job since 2012 and was previously an executive a luxury powerhouse LVMH. Jimmy Choo has more than 150 stores around the world.
The move comes on the heels of Coach’s $2.4 billion acquisition of Kate Spade, which was another bid by a U.S. retailer to accelerate growth by picking up a likable brand with a younger following.
“We expect more consolidation in this market, with more ‘affordable’ luxury houses looking to upscale,” said Jonathan Buxton, head of consumer and retail at Cavendish Corporate Finance.
Shares of Michael Kors edged up 1% in pre-market trading, while shares of Jimmy Choo surged 17% in London.