At the end of September 2018, it was announced that Michael Kors had taken over Versace in a move worth $2.1 billion. The news was met with a mixture of excitement and surprise, along with worry and outrage, for what is one of the biggest ever takeovers in the world of fashion. US fashion giant Michael Kors had already expanded by buying Jimmy Choo for just over $1 billion the year before but this deal far surpasses that.

What Will Happen to Versace?

With its distinctive brand and a reputation for creating luxury items of clothing, worn by many of the highest profile celebrities, many of its high-profile fans may be worried about its future direction. Creative director Donatella Versace will remain involved in the business though, leading its creative vision. And Michael Kors is a luxury brand not to be sniffed at, despite carrying a lower price tag for much of its offering.

The initial plans for the future of Versace are to increase the number of retail stores from 200 to 300, in an attempt to double revenue to over $2 billion. Growing ecommerce and increasing its accessories offering from 35% to 60% of revenues should also help achieve this ambitious goal.

Will it Shake up the World of Fashion?

Along with the takeover of Jimmy Choo, this is a signal of intent from Michael Kors to dominate the luxury fashion market. With a proposed increase in the number of stores and growth of accessories, it could make some Versace items become more affordable and reach a new audience.

However, keeping Donatella Versace involved suggests there will be no cheapening of the luxury Italian brand. Analysts also think the takeover will allow Michael Kors to compete closer with French luxury conglomerates LVMH and Kering, in what could be an exciting time for fashion.

How Big Was the Financial Impact?

The acquisition of Versace sent Michael Kors’ stock lower by 9%, yet some analysts believe this could provide an opportunity during the dip. This drop could be expected, as there is always some level of uncertainty with any takeover, with the potential for things to go wrong.

For other luxury brands such as Prada and Gucci-owner Kering, the takeover seems to have had little impact, with most focusing their efforts on fears surrounding China’s spending boom. For investors involved in CFD trading, the takeover is creating an exciting time, offering up plenty of volatility and uncertainty for trading such stock.

It’s still early days to predict what the future holds for Michael Kors and Versace, for both the world of fashion and finance. It could be a match made in heaven or hell. 

Published by Alex Hales