Survive with a broken arm! Capri (CPRI.US) completes sale of Versace: debt repayment reduces leverage, focuses on smart competition for core brands

The Zhitong Finance App learned that Prada (01913) completed a transaction to acquire Versace from Capri Holdings (CPRI.US) for 1.25 billion US dollars this week. Capri bought the Versace brand for $2 billion in 2018. The company decided to divest the brand during the difficult post-pandemic period. In fiscal year 2025, Versace's revenue fell 15% to $193 million, and its business clashed with the trend of “low-key luxury.” Meanwhile, Prada achieved 17% revenue growth last year (to 5.4 billion euros), thanks to Miu Miu's business promotion. The company expects Versace to increase its pro-forma revenue (pro-forma revenue) by 13% while untapped growth potential by integrating the Italian supply chain.

Lorenzo Bertelli, Prada's marketing director and successor, will be the executive chairman of Versace. The new creative director Dario Vitale (who worked for the Miu Miu brand) will lead the design team, while Donatella Versace, the former CEO of Versace, has previously left the company.

Capri completed the sale of Versace at this point in time, at a critical time when it was facing severe financial pressure and strategic transformation. It has been facing declining revenue, shrinking profit margins, and ongoing debt. The $1,375 billion in cash from this sale will mainly be used to repay most of its debts and significantly improve its financial situation. Once the transaction is completed, Capri's leverage ratio will be significantly reduced, reducing its financial burden and borrowing costs.

Capri CEO John Idol said the company plans to use the proceeds from the sale to repay most of its debts, which will greatly enhance the company's balance sheet. He pointed out that the completion of the transaction would significantly reduce Capri's leverage ratio and provide greater financial flexibility for future investment growth and return of capital to shareholders.

Selling Versace's performance when it continued to decline enabled Capri to stop losses in time and prevent the brand from continuing to drag down the group's overall performance. Selling Versace allowed Capri to focus resources and management attention on the growth strategies of its remaining two core brands, Michael Kors and Jimmy Choo. Michael Kors is the Group's largest brand, but facing ten consecutive quarters of declining revenue, it is in urgent need of significant investment and transformation.

The sale took place in an important industry context: Tapestry (Coach's parent company) plans to acquire Capri were blocked by the US Federal Trade Commission (FTC) in late 2024 on the grounds that it could lead to a monopoly. After the merger failed, Capri must prove his ability to survive and thrive independently. The timely completion of Versace's sale is a key step in its restructuring plan, showing the market that it has a clear future direction.

The deal marks Capri's aim to reshape its position in the light luxury market and better differentiate itself from large French luxury goods groups (LVMH and Kering Group).

Idol emphasized, “We remain committed to advancing our strategic plans across the two brands Michael Kors and Jimmy Choo to unlock the full potential of our iconic brands. Looking ahead, we are confident that our business will grow steadily this year and lay a solid foundation for renewed growth in the 2027 fiscal year.”