Versace’s Love Affair With Hip Hop Spurs Michael Kors Deal

By CultureBanx Team

  • Michael Kors acquiring Versace for $2.1B

  • Versace boasts more than 14 million Instagram followers and hip hop loyalty

Versace found the ultimate fan base with ’90s rap icons, now Michael Kors (KORS -0.29%) $2.1 billion acquisition of the iconic Italian luxury house, plans to tap into the mutual admiration that lingers to this day. Is it actually possible for Kors resources to insulate Versace from potential creative disruptive financial problems, while still allowing the house to focus on making resounding urban hits?

Why This Matters: Versace boasts more than 14 million Instagram followers, making it perhaps the most influential social media platform for luxury brands. This directly impacts black consumers since they are the biggest user group on Instagram at 43%, according to Pew Research. Not to mention rappers are quickly becoming fashion’s new royalty. Sneaker collaborations include artists like 2 Chainz partnering with the Italian fashion house on its “Chain Reaction” shoes.  

Global sales of sneakers were up 10% to more than $4 billion last year. Hip-hop is a powerful tool for reaching Generations Y and Z, who are expected to account for 45% of the global luxury spend by 2025, according to Bain & Co. They also point out the landscape is shifting, driven by a younger more digitally focused audience and represents challenges for companies like Versace to expand.

Hip-hop is a powerful tool for reaching Generations Y and Z

Here’s how the deal is going to shake out. Blackstone Group owns 20% percent of Versace and they are planning to sell their stake in the business as part of the deal with Michael Kors. Donatella Versace, her daughter Allegra, and her brother Santo Versace own the other 80% of the company. Kors still needs to convince its investors that this deal is a good idea, as its share price slid down nearly 8% the day news of the acquisition broke.

Situational Awareness: As part of Kors quest to emulate the European giants’ multi-brand approach, last year they scooped up Jimmy Choo for $1.2 billion. It’s been reported the company is also trying to purchase Coach owner Tapestry (TPR +0.14%). If it’s able to close on both the Versace and Coach deal, they will be on par to compete with LVMH (LVMUY +0.46%).

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