Michael Kors To Acquire Luxury Shoemaker Jimmy Choo In $1.2B Deal

High-end handbag maker Michael Kors has entered an agreement to take over Jimmy Choo, a British luxury fashion brand known for its shoes, handbags and accessories, for $1.2B. The two premier retailers confirmed the deal Tuesday morning.

This acquisition will expand Michael Kors' reach in the luxury shoe market, the Wall Street Journal reports. The market for high-end handbags has suffered as of late, with handbag sales slumping 2% in 2016. Demand for luxury shoes, on the other hand, has remained robust and increased 9% in the past decade, according to research from Exane BNP Paribas.

Luxury brands have been combating strong competition and pressure from department stores to increasingly discount their products, tightening profit margins. Luxury retailers such as Michael Kors, Coach and Ralph Lauren have been pulling out of big-box multi-brand retailers to preserve their upscale brands.

This is the second major luxury brand acquisition of the year. In May, high-end fashion retailer Coach agreed to buy Kate Spade in a $2.4B deal that would unite the brands to navigate today’s tough retail environment together.

CBRE's Richard Hodos, vice chairman of the New York-Tri State region's retail services team, told Bisnow following Coach’s acquisition that consolidation in the luxury retail market would likely persist as companies sought more cost-effective ways to preserve their brands in-store while establishing functional back-end logistics as they grow their online presence.

"The most efficient channel for most of these retailers that started out as brick-and-mortar is still the store — selling and accepting returns in-store," Hodos said. "The part they haven't figured out is how to fulfill orders placed online and accept returns in-store, and what that does [to] inventory. There are all kinds of logistical pieces."