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Europe has historically dominated the luxury fashion industry for decades, thanks to the creation of some of the world's most renowned high-end brands, such as Chanel, Dior, Gucci, and Louis Vuitton.
It all changed in 1981 when American fashion designer Michael Kors founded the fashion house Capri Holdings. The company eventually acquired other esteemed brands, such as Versace and Jimmy Choo, which put the U.S. at the forefront of the luxury fashion world for many years.
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Unfortunately, Capri's empire has begun tumbling down as it has been experiencing some of the steepest sales declines in its history. This is partially due to the softening in customer spending due to inflation and an uncertain global economy, which has led the luxury fashion market to experience one of its worst slumps since the Great Recession.
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However, like in any other market sector, a few outliers have overcome all odds due to their savvy business executions and trend-forward strategies.
Prada is in talks to acquire Versace from Capri
This week, it was revealed that Prada is in talks with Capri CPRI to acquire the luxury fashion brand Versace for nearly $1.6 billion, and an agreement could be reached as soon as this month.
The Prada Group (PRDSF) is a Milan-based luxury fashion house founded in 1913. It owns its namesake brand, Prada, and other renowned brands, including Miu Miu, Church's, and more.
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In 2018, Capri acquired Versace for $2.1 billion to revitalize the struggling brand, so Prada would receive a huge discount if the deal comes to fruition.
The deal would also represent nearly a half-billion-dollar loss for Capri, who has already been facing continuous financial strains and steep declines.
According to Capri's latest earnings report, overall revenues decreased 11.6% compared to the prior year, with Versace's down 15%.
Unlike its rivals, Prada has been immune to the luxury fashion slump, delivering outstanding sales and generating continuous revenue growth.
In its latest earnings report, Prada's revenues increased by 17% year over year, which is well above-market, with Miu Miu generating over 93% retail growth.
Capri's previous unsuccessful deal to turn around its troubled business
Although this deal seems promising since Prada's successful brand management could be Versace's saving grace, the acquisition could still be delayed or completely fall apart, which is something Capri is too familiar with.