Capri Holdings (CPRI) stock plunged nearly 50% out of the gate Friday after a U.S. judge on Thursday blocked the luxury retailer's pending $8.5 billion merger with Tapestry (TPR). The deal would have brought Capri's family of brands – Michael Kors, Jimmy Choo and Versace – together with Tapestry's high-end Coach, Kate Spade and Stuart Weitzman segments.
The merger was originally announced in August 2023 and the Federal Trade Commission (FTC) moved to block it in April 2024, arguing that "this deal threatens to deprive consumers of the competition for affordable handbags, while hourly workers stand to lose the benefits of higher wages and more favorable workplace conditions."
After an eight-day trial in New York, U.S. District Judge Jennifer Rochon sided with the FTC and rejected Capri and Tapestry's defense of the deal, according to Reuters. The companies argued that "handbags are nonessential items whose price consumers can control by not buying them if they become too expensive," which the judge said "ignores that handbags are important to many women, not only to express themselves through fashion but to aid in their daily lives."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"These bags are a product which millions of people rely on throughout their daily lives," Henry Liu, director of the FTC's Bureau of Competition, told Fashion Dive. "The decision will ensure that Tapestry and Capri continue to engage in head-to-head competition to the benefit of the American public."
The decision "is disappointing and, we believe, incorrect on the law and the facts," said Tapestry in a statement.
The retailers "operate in an industry that is intensely competitive and dynamic, constantly expanding, and highly fragmented among both established players and new entrants. We face competitive pressures from both lower- and higher-priced products and continue to believe this transaction is pro-competitive and pro-consumer," it added.
Capri and Tapestry said they intend to appeal the ruling.
Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, disagrees with the judge's decision.
"We don’t cover the two brands because they weren't relevant enough to make our top 200 brands index, so by definition, this shocking block of the acquisition of CPRI makes zero sense," Clark said in emailed commentary. "These are two marginal brands trying to compete, so they have zero chance to control the handbag market, hurting consumers. This is a clear overreach of government."
Is Capri stock a buy, sell or hold?
Friday's negative price action is nothing new for Capri. Indeed, heading into today's trading, the consumer discretionary stock was down more than 17% for the year to date.
And Wall Street is on the sidelines when it comes to the small-cap stock. According to S&P Global Market Intelligence, the average analyst target price for CPRI is $41.50, roughly in line with its October 25 close but representing implied upside of nearly 85% to current levels. Meanwhile, the consensus recommendation is a Hold.
However, the ratings and price targets on CPRI stock could very well be adjusted in the days and weeks ahead as analysts digest the news of the blocked merger.
Related Content
-
You Don’t Want to Retire in Portugal: Here Are Three Tax Reasons WhyRetirement Taxes With the NHR benefit retiring and pension taxes increasing, you might rethink your retirement plans in Portugal.
-
Home Depot's Winning Ways Fueled Its 100,000% ReturnHome Depot's wide moat leaves little room for competition – and shareholders have profited as a result.
-
Home Depot's Winning Ways Fueled Its 100,000% ReturnHome Depot's wide moat leaves little room for competition – and shareholders have profited as a result.
-
Apple's 100,000% Return Is a Result of Innovation, Brand Loyalty and BuybacksApple spends billions buying back its own shares, but this is just one catalyst behind the incredible growth in its share price.
-
Has This Unconventional Growth Fund Lost Its Mojo?The Primecap Odyssey Growth Fund has lagged the broader S&P 500, but it still boasts a solid return and provides investors with diversification.
-
Five Key Retirement Challenges (and How to Face Them Head On)Life will inevitably throw challenges at you as you get older. But making a flexible retirement plan — and monitoring it regularly — can help you overcome them.
-
Four Action Items for Federal Employees With $2M+ SavedIf you can't stand the chaos, maybe you can walk off into the sunset of retirement. Here are some thoughts on how to figure out if that would work for you.
-
How to Help Accelerate Support for Women's EqualityIt's International Women's Day, and the theme this year is Accelerate Action. Here's how we can all pitch in to help drive gender parity.
-
Stock Market Today: Stocks Swing Higher on Powell SpeechInvestors cheered after Fed Chair Powell repeated his confidence in the strength of the U.S. economy.
-
Mixed Jobs Report Offers Relief for Now: What the Experts Are SayingThe February employment figures were rough around the edges but largely met expectations.
