Jimmy Choo has a new owner.
Michael Kors has agreed to purchase the luxury shoe brand for approximately $1.2 billion, adding an established global brand to the U.S. retailer’s stable as its own handbag and accessories sales suffer.
Many retailers, not only Michael Kors, have faced decreasing sales in the last couple of years because of high competition from online shopping, discount as well as fast fashion stores like H&M and Zara. In an attempt to convince new costumers to shop, Michael Kors has heavily discounted their products, which lastly lead more people to wait for the sale season in order to avoid paying the full price and diminishing the brand´s reputation. Sales have been dropping, around 11% in the last quarter, and investors have been liquidating a third of the stock´s value in the last year. Furthermore, Michael Kors is about to close around 100-125 of its standalone stores, renovating another 100+ stores and focus on more innovative designs. The company also plans to reduce its discount and sales as well as to sell fewer items to department stores, which are inclined to mark town items in order to move/reduce inventory.
With this acquisition Michael Kors has the opportunity for international growth and is able to gain a foothold in the luxury shoe sector. “We admire the glamorous style and trend-setting nature of Jimmy Choo designs,” said Michael Kors, honorary chairman and chief creative officer, in a statement. Right now the company is in a transition phase in order to fulfill ist strategic plan „Runway 2020“. Acquiring Jimmy Choo was one of the necessary steps to move forward and adapt to the quickly changing and challenging fashion envrionment. In order for Michael Kors to grow and become a unique, worldwide brand, the product variety needs to be improved as well as the geographical reach extended. Also a brand platform is in planning in order to ensure future acquistions. Jimmy Choo was just the first acquisition that helps fulfill those plans, as Michael Kors wants to become a global luxury fashion group like other european fashion groups like LVHM or Kering.
The news of Michael Kors acquiring Jimmy Choo only proves that shoes are an important element of the retail strategy of luxury brands and challenge bags as the „cash cows“ of the labels. Departement stores like Harrod´s and Selfridges in London, Level Shoes in Dubai or Saks Fifth Avenue in New York are nowadays dedicating whole floors of their stores exclusively to shoes. And the huge success of Christian Louboutin proves that a label that is mainly focused on shoes can be come extremely profitable.
Jimmy Choo was started in 1996 by British Vogue editor Tamara Mellon and designer Jimmy Choo. The brand became quickly known and loved especially among celebrities like Sarah Jessica Parker and Princess Diana. Under Denis´and Sandra Chois, Creativ director and niece of the label founder, the brand grew on average +11% per year for the last four years. This growth rate was possible due to successful product development, expansion in commerce as well as dynamic marketing. The brands bestsellers are stilettos with a 8,5cm heel, followed by the sneaker modell „Miami“ for women. But also the sales of men shoes are increasing and almost makes up for 20% of sales of Jimmy Choo– a sign for the increasing market (demand) for luxury men shoes.
With an average price of 500 US-Dollar the shoes of Jimmy Choo belongs to the middle luxury price segment, that matches the philosophy of Michael Kors perfectly as this label is seen as a pioneer of the concept of „accessible luxury“. Also the idea of selling shoes as well as perfumes and bags as the basis of a lifestyle brand and therefore leave out the Ready-to-wear elements, could have supported the takeover of Jimmy Choo.
With this acquisition Michael Kors is making a step into the future of building up an international fashion luxury group and expanding their global brand image.
