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In France, two giant luxury conglomerates own nearly every luxury brand. LVMH has Louis Vuitton, Givenchy, Céline, Marc Jacobs, Fendi, and many more, while brands like Yves Saint Laurent, Gucci, Stella McCartney, Alexander McQueen, Balenciaga, and others make up Kering's portfolio. No one's come close in America, where brands are way more fragmented. Or at least they have been, until now.
On Tuesday, Michael Kors confirmed its $1.2 billion purchase of luxury shoe brand Jimmy Choo. While the Michael Kors brand has been struggling with overexposure that’s resulted in uninterested shoppers and slumping sales, Jimmy Choo is a footwear darling. The coveted, high-end, red-carpet-friendly brand will certainly give Michael Kors a much-needed reputation boost in the fashion space.
But the purchase isn't just for cache; Michael Kors CEO John Idol says it's part of a larger strategy. Following the announcement of the sale, he boldly told CNBC that “this will not be the last acquisition” for the company, which he hopes to turn into a “luxury group.”
If this sounds vaguely familiar, it's because it's the same thing Coach is trying to do. Back in May, Coach bought kitschy lifestyle brand Kate Spade for $2.4 billion, just two years after dropping $574 million on Stuart Weitzman (both beloved American brands). These deals have been extremely strategic; Coach CEO Victor Luis said outright in a statement that with Kate Spade joining the brand, Coach will be “the first New York-based house of luxury lifestyle brands.”
While brands like Kate Spade, Stuart Weitzman, and even Jimmy Choo fall short of the names in LVHM and Kering's portfolios, the budding empires of Michael Kors and Coach are battling for a different type of customer. Think less luxury and more mall splurge; instead of a $3,000 Céline bag, a $300 Michael Kors dress.
As Luis noted earlier in May about where Coach is trying to hit, “it differentiates us from the traditional luxury brands. Given the huge potential with the middle class in Europe, in the United States, and across Asia, India, and South America, the opportunity for modern luxury brands — brands that are about approachability, not just about exclusivity — is huge. And that’s our focus.”
It’s anyone guess who will be the next acquisition in the war between Michael Kors and Coach to become the great American luxury conglomerate — Coach reportedly tried (and failed) to buy British heritage brand Burberry late last year — but it’s safe to say the battle is on.