This deal is part of Michael Kors’ efforts to strengthen its position against its rivals which include Tapestry Inc. (TPR). Both companies made significant acquisitions last year with Michael Kors purchasing Jimmy Choo for $1.2 billion and Tapestry picking up Kate Spade.
The purchase of Jimmy Choo helped boost Michael Kors’ growth, and the company topped analysts’ expectations on revenue and earnings for its fourth quarter of 2018. Michael Kors saw a 10% growth in revenue during the quarter.
The purchase of Versace is expected to help improve Michael Kors’ competitive strength in the current retail environment. Some experts believe the deal will benefit both companies regarding broadening distribution and this could lead to some changes at Versace concerning pricing and assortment as well to appeal to the younger generation.
Investors, however, did not take too kindly to the news and sent the stock dropping over 7% during Monday trading.