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The analysts’ view: Michael Kors might struggle with integration of so many different brands

By Angela Gonzalez-Rodriguez

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Business |ANALYSIS

New York.- Barely hours before Michael Kors confirmed its acquisition of Italian fashion powerhouse Versace, the American company’s shares dipped, and closing down by over 8 percent. Citi analyst Paul Lejuez described the movement as an "overreaction" with some considering the stock to be oversold.

Some analysts following the stock voiced their concerns regarding Michael Kors’ capacity to handle the acquisition, especially after investing 1.2 billion dollars to buy Jimmy Choo last year and still struggle to recover from a two-year sales slip.

“Kors has not fully integrated the [Jimmy Choo] business,” Wells Fargo analyst Ike Boruchow wrote in a note to market published by the ‘New York Post’. Boruchow added that a Versace deal is “possibly doing too much too quickly.”

On a similar note, Craig Johnson, president of Customer Growth Partners pointed out that “some perceive as past its peak” the Versace’s price tag.

Concerns about Versace’s profitability and its impact on Michael Kors’ finances

Likewise, there are some concerns from the market regarding Versace’s profitability and its impact on the newly created Capri Holdings. The Italian brand was profitable in 2015 but the year after it posted a loss of 7.4 million euros that wasn’t offset by the 3.7 percent annual revenues’ rise. 2017 was a better year, with Versace turning a profit with revenue of 686 million euros.

Versace's unstable performance has not been well received by analysts. "Despite its profile, Versace has struggled to grow sales," said Neil Saunders, managing director of GlobalData Retail, reported ‘Seeking Alpha’. Saunders added that Kors would not be buying "a perfectly performing brand" as Versace still "needs work and some repositioning."

Photo:Versace official website

LVMH
Michael Kors
Versace