Capri Stock Craters After Judge Blocks Tapestry Merger: What to Know
Capri Holdings stock has been nearly cut in half Friday after a U.S. judge blocked the retailer's proposed merger with Kate Spade parent Tapestry.
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
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Federal Reserve Meeting: Updates and Commentary
Kiplinger experts provide commentary and analysis on the November Federal Reserve meeting.
By Kiplinger Staff Last updated
-
Market Reaction to Election Results: What the Experts Are Saying
Jobs Report Election uncertainty has been removed from the list of investors' worries, helping equities soar.
By Dan Burrows Published
-
Federal Reserve Meeting: Updates and Commentary
Kiplinger experts provide commentary and analysis on the November Federal Reserve meeting.
By Kiplinger Staff Last updated
-
Market Reaction to Election Results: What the Experts Are Saying
Jobs Report Election uncertainty has been removed from the list of investors' worries, helping equities soar.
By Dan Burrows Published
-
Should You Buy Tesla Stock After Trump's Election Win?
Shares in Tesla popped on the outcome of the presidential election. Is it time to buy?
By Dan Burrows Published
-
Two Consequential Tax Cases You May Not Have Heard About
The Supreme Court's decisions in these cases create uncertainty about challenging IRS regulations and guidance. Expect more litigation to follow.
By John M. Goralka Published
-
Stock Market Today: Stocks Rise Amid a Broad-Based Election Day Rally
All 11 sectors closed in the green on Tuesday, and all three major indexes added more than 1%.
By David Dittman Published
-
Stocks Rally on Election Day as Markets Brace for Volatility
All three major indexes opened higher as voters chose the 47th President of the United States.
By Dan Burrows Published
-
Are You an Estate Planning Procrastinator? Where to Start
Quit putting it off, because it's vital for you and your heirs. From wills and trusts to executors and taxes, here are some essential points to keep in mind.
By Alex Diaz, MBA, CFP® Published
-
Write a Book in One Day and Become a Best-Selling Author!
If that sounds like a scam, that's because it is. Online publishing scams entice wannabe authors with big promises for a big price. How to protect yourself.
By H. Dennis Beaver, Esq. Published