More Consolidation in the Luxury Sector

Michael Kors acquires Jimmy Choo

July 25, 2017

Fashion brand Michael Kors agreed to buy Jimmy Choo in a deal that values the luxury shoe label at $1.35 billion, continuing the reshuffle of the luxury sector.

As reported in eMarketer Retail in April when Jimmy Choo was put on the block, the fashion and luxury industry is being upended by consumers increasingly shifting their purchases online. In the US, it’s also being disrupted by declining department store and mall traffic and a spending shift toward eating out and other experiences over buying material things. 

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Michael Kors

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This year has been marked by a flurry of sales (and one notable non-sale) in the sector, with Coach acquiring Kate Spade and Neiman Marcus seeking a buyer before abandoning its search.

Jimmy Choo, known for shoes from $750 glitter sandals to $2,450 crystal-embellished pumps, was in a relatively healthy position going to the market. Its 2016 sales rose 14.5% to 364 million pounds, or $466 million, as its operating profit also rose. However, excluding the benefit of a declining pound that boosted translated overseas sales, revenue would have risen just 1.6%.

Michael Kors has not been immune to the pressures of the industry.  For its fiscal fourth quarter ended April 1, revenue fell 11.2%, and same store sales tumbled 14.1%.

The company has weathered two consecutive years of same-store sales declines, with the pace accelerating from a 4.2% decline for fiscal 2016 to a 8.3% decline for fiscal 2017.

Ecommerce sales have grown substantially over the past several years, but from a very small base. Ecommerce sales totaled $209.7 million for fiscal 2017, up more than 50% from the previous year. But that still only amounted to 4.7% of sales.