**Title: The U.S.-European Arms Race of Luxury Fashion: American Brands Merge to Compete with French Powerhouse LVMH**
**American Fashion Brands Merge to Create Luxury Goods Giants**
In a bid to rival French luxury goods titan LVMH (Louis Vuitton Moët Hennessy) and its billionaire owner Bernard Arnault, American fashion brands are engaging in an intense consolidation effort. Arnault, who has been in a tug-of-war with Elon Musk for the title of the world’s richest person, is now facing competition from a growing U.S.-European alliance. The latest merger involves Tapestry, the owner of luxury handbag brands Coach and Kate Spade, which acquired Capri, the parent company of fashion brands Versace, Michael Kors, and Jimmy Choo, for $8.5 billion. This consolidation aims to establish a new global luxury house and counter the effects of slowed consumer spending amid inflation and rising interest rates.
**The Ambitions of Tapestry and Capri: Creating a Powerful Global Luxury House**
Tapestry CEO Joanne Crevoiserat expressed the goal of creating a powerful global luxury house through the acquisition of Capri. This move is seen as an attempt to mitigate the impact of reduced consumer spending caused by inflation and rising interest rates. The acquisition, which marks a significant consolidation in the luxury fashion industry, is expected to help both companies navigate the challenges of the current market landscape.
**LVMH’s Dominance and Bernard Arnault’s Wealth**
LVMH, the French luxury group formed in 1987, is a powerhouse in the industry. With a market cap of $462 billion, the company owns 75 brands spanning six sectors, including prominent fashion houses like Christian Dior, Givenchy, and Fendi, as well as renowned jewelry company Bulgari and cosmetics retailer Sephora. LVMH’s success has been shaped by its chairman and CEO, Bernard Arnault. He became the largest shareholder of the company in 1989, leading to his rise as a business magnate. Arnault, with a net worth of $226.2 billion, primarily tied to LVMH shares, has been in constant competition with Elon Musk for the position of the world’s richest person.
**Arnault’s Resilience and LVMH’s Olympic Sponsorship**
Despite recent shifts in rankings, Arnault continues to thrive in the luxury industry. As evidence of his success, LVMH announced its decision to become a premium sponsor of the 2024 Summer Olympics in Paris. The company committed €150 million ($166 million) to the Olympic and Paralympic games, solidifying its status as a prominent player in the global luxury market.
**Recovering from the Pop of the Luxury Retail Bubble**
Following the excessive consumer spending of the pandemic years, the luxury retail market has experienced a significant slowdown. Inflation and rising interest rates have affected American consumer spending, diminishing demand for discretionary items such as electronics, furniture, and apparel. As a result, luxury brands have faced the consequences of decreased consumer enthusiasm. In May, European luxury stocks plummeted by $32.3 billion as investors anticipated the impact of a softening U.S. economy. LVMH shares alone suffered losses of over $50 billion after reaching a record-breaking $500 billion market cap. Tapestry’s acquisition of Capri aims to address these challenges by increasing influence in the European-dominated market, as well as mitigating the effects of the spending slump.
**The Future of Tapestry and Capri: Consolidation in the Luxury Fashion Industry**
The acquisition of Capri by Tapestry is projected to close next year after approval from Capri shareholders. The deal, which offers a nearly 65% premium, will see Capri shareholders receiving $57 per share in cash. This consolidation will bring together two powerful companies with a combined market cap of $14.5 billion. In the 2022 fiscal year, Tapestry and Capri generated a total of $12 billion in global sales and an adjusted operating profit of nearly $2 billion. The merger positions the new entity as a formidable player in the luxury fashion industry, seeking growth opportunities in international markets.
By combining their strengths and resources, American fashion brands are striving to compete with LVMH and strengthen their position in the luxury market. The ongoing U.S.-European arms race signifies the dynamic nature of the fashion industry and the pursuit of dominance in an increasingly challenging market environment.