Tapestry Halts Capri Integration Plans

By Juveria Tabassum

(Reuters) – Tapestry has paused its integration plans with Capri as it appeals a U.S. judge's decision blocking its $8.5 billion acquisition of the Michael Kors owner, the company announced on Thursday.

The merger faced opposition last month when the U.S. Federal Trade Commission argued it would diminish competition among the top two handbag manufacturers in the U.S.

“We have contingency plans ready, pending the outcome of the appeal…,” said Tapestry (NYSE: TPR) CFO Scott Roe during a post-earnings call.

Following their latest earnings report, Tapestry shares increased by 4.5% and Capri's stock saw a 2% rise. Despite expectations that President-elect Donald Trump will adopt a less strict antitrust approach, analysts note that the timeline may be too late for these companies.

Mari Shor, a senior equities analyst at Columbia Threadneedle Investments, stated, “The date at which Tapestry can walk away without penalty is Feb. 10, and I do not expect an appeals decision or changes to the FTC before then.” She added that the merger appearing unlikely to complete is perceived positively by investors.

Executives indicated Tapestry would work on reviving growth for its Kate Spade and Stuart Weitzman brands and build on the strong demand for Coach, should the Capri deal not materialize. Coach's Tabby handbags have gained popularity with younger consumers, contributing to eight consecutive quarters of gross margin growth for Tapestry.

Conversely, Capri has experienced a decline in sales for seven consecutive quarters since the merger announcement in August last year and is set to release its second-quarter results after market close.

Tapestry noted a 27% increase in sales in Europe during the first quarter, helping to offset a 5% revenue drop in Greater China. Analyst Sky Canaves from EMarketer remarked that Tapestry’s broader merchandising strategy seems to resonate well with aspirational consumers, highlighting some recovery for the Stuart Weitzman brand.

Expectations for Tapestry's earnings per share in 2025 range between $4.50 and $4.55, improved from an earlier forecast of $4.45 to $4.50. With reported revenue of $1.51 billion exceeding the expected $1.47 billion, their adjusted earnings per share of $1.02 also surpassed analysts’ expectations of 95 cents.