Michael Kors has picked out some new shoes to go with its handbags.
On Tuesday, Michael Kors Holdings said it had agreed to buy the shoe company Jimmy Choo for 896 million pounds, or about $1.2 billion, the latest push by an American luxury company to find sources of growth in an increasingly competitive retail landscape.
Many upscale retailers are grappling with plummeting sales and tepid profits. Mall traffic in North America has declined sharply, and deep discounting tactics have resulted in some luxury labels losing much of their luster with core customers.
Shoppers who have traditionally been loyal to the so-called middle market have gravitated toward brands at extremes of the style, and price, spectrum. That has benefited e-commerce giants like Amazon, fast-fashion brands like H&M and Zara, and luxury houses like Gucci.
And it has left companies like Michael Kors — once the runaway leader of the “accessible luxury market” — exposed.
Michael Kors, known for fashion-forward designs and competitive prices, has been hit particularly hard after overreaching in a rapid expansion effort.
In May it downgraded it's sale forecast, and saying it would close as many as 125 of its full-price retail stores. Its share price has lost a fifth of its value in 2017.
The deal for Jimmy Choo could give it a new avenue for growth.
Michael Kors is heavily reliant on the outlets and department stores that have been hammered by changing shopping habits, meaning its products are often heavily discounted. But Jimmy Choo is in a higher price bracket than Michael Kors, and it attracts a different range of customers, bringing hefty profit margins and an upmarket brand aura.
“We believe that Jimmy Choo is poised for meaningful growth in the future,” John D. Idol, the Michael Kors chairman and chief executive, said in a news release. “We are committed to supporting the strong brand equity that Jimmy Choo has built over the last 20 years.”
The shoemaker was founded in 1996 by Tamara Mellon, then accessories editor at British Vogue, and the Malaysian cobbler Jimmy Choo. It shot to fame thanks to a slew of celebrity patrons, including Diana, the Princess of Wales, and the actress Sarah Jessica Parker, who embraced its signature sky-high stilettos and the vampish aesthetic for which it became known.
After three cycles of private equity ownership, it became the first luxury footwear brand to list on a public market in 2014. Prices range from $425 for flat shoes to $1,795 for over-the-knee suede boots, while small clutch handbags start around $700, according to Jimmy Choo’s website.