Michael Kors parent company Capri Holdings Limited is set to acquire its first factory for an undisclosed sum in a move that will help the luxury company operate vertically and better manage production.
Tuscan shoe factory Alberto Gozzi S.r.L., owned and operated by the founding Gozzi family since 1974, offers Capri some much-needed supply chain synergies in the footwear category. All of Gozzi’s craftsmen will become employees of Capri Holdings, the American luxury holding company said, and the transaction is expected to close in the first calendar quarter of 2020.
In May, Capri expressed interest in acquiring factories to stimulate growth.
Based in Tuscany in the town of Pistoia, the factory has manufactured “high-end shoes for many of the world’s top luxury brands over the years,” said Capri, which plans to have the Gozzi craftsmen initially develop and produce footwear for its Jimmy Choo and Versace brands. “The production of Michael Kors Collection shoes will be added at a later date,” Capri said.
“This acquisition allows us to further align with the industry’s best practices and to strengthen our technical competencies while cementing our position in the global luxury market,” Capri chairman and CEO John D. Idol said.
The acquisition appears to have received the “thumbs up” from Wall Street.
“We believe this is a step in the right direction, as it shows management is working diligently to become a more vertically integrated biz and drive synergies across the supply chain,” Jefferies Research analyst Randal J. Konik said.
The acquisition indicates that Capri sees the footwear category as a “significant area of growth,” Konik said. Versace has plans to grow men’s and women’s accessories and footwear from 35 percent to 60 percent of revenues, he added, while Jimmy Choo and Michael Kors are also working to accelerate growth in the category.
Owning a footwear factory could support Capri’s goal of reaching $50 million in synergies on an annualized basis over the next several years, according to Konik’s evaluation of the deal. “As these initiatives bear fruit, they could provide additional upside to numbers ahead,” he said.
Konik, who has a “buy” rating on Capri shares, believes the luxury company owns a a stronger portfolio of brands versus its American handbag competitor, Tapestry Inc. The parent company to Coach and Stuart Weitzman has suffered at the hands of its Kate Spade brand, which saw creative director Nicola Glass’ products falling flat with customers and brand CEO Anna Bakst recently announce her departure timed for the end of the current calendar year.