Versace Exit Is Capri's Big Bet On Michael Kors Revival, Says Analyst

Core Viewpoint - Capri Holdings Ltd is selling the Versace brand to Prada for $1.375 billion, which is expected to close in the second half of 2025 pending regulatory approval [1][2]. Group 1: Financial Impact - The proceeds from the sale will strengthen Capri's balance sheet, enhance investment in Michael Kors, and support debt reduction and share buybacks [2]. - Capri originally purchased Versace for$2.12 billion in 2018, indicating a loss on the sale [2][4]. - The sale is anticipated to boost overall company margins and free up funds for revitalization efforts for Michael Kors [4]. Group 2: Market Context - The sale of Versace was anticipated, with reports of Capri seeking a buyer circulating for months, and Prada emerging as a likely suitor [2]. - The analyst estimates that Prada is paying approximately 22x FY24 EBITDA and 1.6x trailing sales for Versace [3]. Group 3: Strategic Considerations - The sale is viewed as a logical move for Capri following the failed acquisition of Tapestry Inc., allowing the company to raise capital and enhance margins [3]. - Parting with Versace eliminates a previously expected growth catalyst, raising questions about the future profitability of Michael Kors due to ongoing challenges in wholesale and promotional markets [4].