Michael Kors is likely buying Versace for one key reason
- The Italian fashion house Versace is being acquired by American conglomerate Michael Kors, which will change its name to Capri Holdings.
- Capri has already laid out its plan to turn Versace into a more accessories-focused brand comfortable with selling online.
- That would mimic the roadmap of fellow Italian luxury brand Gucci, which has gained popularity among teens in recent years.
- Versace is poised to capture more of that market, as the demographic it appeals to already skews young, according to SimilarWeb.
Versace is going through some changes.
The Italian fashion house is being acquired by Michael Kors in a deal worth $2.12 billion. After the deal closes, Michael Kors will be renamed Capri Holdings.
Michael Kors has already laid out its plans for adjusting Versace's strategies, including focusing on accessories and footwear, opening more stores, and embracing online shopping.
It's a pivot to what Cowen and Co. analysts called "new luxury" in a note to analysts on Monday. Cowen analysts described the trend as the "democratization and street-ification of luxury fashion" and said it is a "huge opportunity" for Versace, which has "the perfect DNA for what's happening now in luxury goods" with its Italian heritage and history of staying close to cultural trends.
Versace's online potential is further enhanced by its ability to attract attention from younger consumers. According to SimilarWeb, 39% of Versace's total website traffic in the last 12 months came from people between the ages of 18 and 24.
The new strategy for Versace mirrors what's happening with fellow Italian brand Gucci. Gucci has embraced luxury streetwear, younger consumers, and online sales. And it seems to have worked well, as sales at the brand have skyrocketed.
Sales at Gucci have grown 46.6% in the first half of 2018, according to parent brand Kering. In the first three quarters of 2017, nearly 55% of all Gucci's sales were from customers under the age of 35, The Wall Street Journal reported.
As sales slow for the more accessibly priced Michael Kors brand, Versace's higher-end appeal and ability to connect with younger consumers could be the ticket to overall growth.
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