In 1994, Versace gained global recognition for designing actress Elizabeth Hurley’s outfit that she wore during the premiere of her movie – Four Weddings and a Funeral. The slinky black dress held together by gold safety pins was simply nicknamed “That Dress”, and helped propel the Milan-based company into an international fashion house. Over the next two decades, Versace produced upmarket Italian-made ready-to-wear and leather accessories while also designing luxurious high-fashion flair that enticed the likes of Michael Jackson, Princess Diana, and Elton John. However, its desire to expand overseas and reach full potential was hindered by its limited profits. On 25th September, 2018, the American fashion conglomerate Michael Kors confirmed a $2.1 billion takeover of Versace by acquiring 20% of its stakes, while pledging to expand Versace’s sales worldwide.
The company was founded in 1978 by Gianni Versace, who was brutally murdered in 1997. It was his sister, Donatella Versace, who oversaw the rise of the company while serving as its “Artistic Director’ and Vice-President. Backed by a strong demand of luxury accessories from China, the U.S. private equity group Blackstone bought a 20% stake in the company for $250 million in 2014, in an attempt to fund overseas expansion. However, Blackstone quickly pointed out that Versace’s insufficient performance didn’t justify a market listing – thereby introducing the company to potential buyers who were ready to make larger investments.
One of the first companies to inquire about buying Versace was Paris-based luxury group Kering, who pulled out of the deal citing the high prices of Versace’s bold and glamorous products. Eventually, it was Michael Kors, who decided to acquire the Italian fashion house. As part of the deal, Blackstone is set to sell their share in Versace to the American clothing brand, which will be renamed Capri Holdings.
The move from Michael Kors is in line with the U.S brands ambition to aggregate various luxury brands – including fashion, shoes, and accessories – under one larger group. In 2017, the company bought British stiletto-heel maker Jimmy Choo for $1.2 billion. By aggregating several products under one group, it hopes to consolidate power and compete with European giants Louis Vuitton and Kering – who holds a strong foothold in the global fashion industry.
Michael Kors has already divulged its plans for modifying Versace’s sales strategies. It includes an extensive focus on accessories and footwear, a category that’s more affordable and fast-selling, to boost up revenues. The new owner also plans to increase the number of Versace outlets from 200 to 300 stores, along with expanding its online shopping portfolio. With these changes, Michael Kors plans to double Versace’s turnover to $2 billion.
The announcement has caused major distress and consternation among Versace’s fans, owing to the radically different image of Michael Kors, which is associated with all-American style and mass appeal. However, Michael Kors intends to keep Donatella Versace as the “Artistic Director” to lead the “creative vision”. With both companies appealing to a younger crowd, the acquisition hopes to capture the majority of 18-24 year clothing requirement. Nonetheless, Michael Kors’s shares fell down 8.7% on 24th September following the news.