Michael Kors Buys High-End Shoe Retailer Jimmy Choo For $1.2 Billion
KELLY MCEVERS, HOST:
There is a term in retail - affordable luxury. The prices are expensive - maybe a few hundred dollars for a purse - but not at the level of super upscale brands where a similar bag could cost thousands of dollars. Michael Kors used to rule affordable luxury, but the designers company has been struggling for a few years now. So what do you do when you're in a rut? You buy shoes.
(SOUNDBITE OF FILM, "SEX AND THE CITY")
SARAH JESSICA PARKER: (As Carrie Bradshaw) With no man in sight, I decided to rescue my ankles from a life of boredom by purchasing too many pairs of Jimmy Choo shoes.
MCEVERS: One of Carrie Bradshaw's favorite hobbies on "Sex And The City" is now Michael Kors' next business move. Michael Kors holdings is buying Jimmy Choo for $1.2 billion. The New York Times' Elizabeth Paton has been writing about this, and we reached her in Paris on Skype. Hi there.
ELIZABETH PATON: Hi. How are you?
MCEVERS: Good. So that is a lot of money to spend on Jimmy Choo shoes. Why is Michael Kors doing this?
PATON: That is a lot of money on shoes. But I think we really need to put today's deal in a broader context in terms of what's happening in the American retail landscape at the moment. You know, in 2017, brands and retailers, they're not just necessarily fighting to stay relevant. They're really fighting for survival. And Michael Kors is a great example of that. I mean, five years ago, this was the brand. Everyone wanted a Michael Kors bag. And now they're really, really suffering because they've overly discounted their product. And when you've devalued your brand like that, people just don't want to buy your stuff anymore. So I think they realized that they needed to diversify away from the Michael Kors brand, and they decided to look up market.
MCEVERS: You talk about how Jimmy Choo is up market from Michael Kors. I mean, I think of both of them as high-end brands, but they are different. Can you explain the difference?
PATON: Yes. I mean, this is what Michael Kors has always wanted you to believe. I mean, basically the magic of a fashion or a luxury brand is to tread that fine line between ubiquity and exclusivity - that is to say, being readily available and being something that people, you know, really have to struggle to buy. And, you know, Michael Kors for a long time did that very well. It's a very digitally savvy company. But it just overexposed itself, whereas Jimmy Choo is actually a much smaller brand. Its prices are much, much higher.
MCEVERS: You talk about how this - Michael Kors is fighting for survival and there's a real crisis now. Is that true for other affordable luxury brands? I mean, what's the challenge right now?
PATON: Yes. I mean, this isn't the first deal of 2017 from the affordable luxury main players. Two months ago, Coach bought Kate Spade for a lot more money, for $2.4 billion. And I think, you know, Coach has been suffering from a lot of the same problems as Michael Kors. They had overexpanded their store base. They had overdiscounted their product. And people were just turning to either end of the retail spectrum. They were buying in Zara and H&M or they were saving up for Gucci.
MCEVERS: Do you think the Michael Kors-Jimmy Choo deal makes sense? I mean, what will you be watching for?
PATON: I think that today's deal does make sense for a couple of reasons. Number one, we've seen this real bifurcation in the fashion and accessories market in recent years. So doing this today means that Michael Kors is no longer stuck in the no man's land that has become the middle market. Something I asked Mr. Idol - John Idol, who is the CEO of Michael Kors, has been talking about - is that the two businesses will stay quite separate.
You're not suddenly going to see Jimmy Choo, which is known for its $3,000 handbags and shoes, suddenly selling things at a price point more associated with Michael Kors and vice versa. And as long as that can happen and, you know, the Michael Kors issues won't taint Jimmy Choo, hopefully Jimmy Choo will be able to boost the sort of profitability of Michael Kors, which is no longer just one American handbag group but is going to become in its - you know, in its dreams a multi-brand international global and luxury powerhouse.
MCEVERS: Elizabeth Paton of The New York Times by Skype in Paris. Thank you so much.
PATON: You're very welcome. Thanks.
(SOUNDBITE OF IKEBE SHAKEDOWN'S "BY HOOK OR BY CROOK") Transcript provided by NPR, Copyright NPR.