Versace’s parent company stock plunged 45% after an affordable-luxury deal was blocked in court

A display window at a Versace clothing store on Fifth Avenue in New York City.

Versace’s parent company, Capri Holdings, suffered a steep loss in after-hours trading on Thursday after a federal judge blocked its proposed merger with Tapestry, the parent of fashion brands Kate Spade and Coach.

Jennifer Rochon, a judge in the Southern District of New York, granted the Federal Trade Commission’s request for a preliminary injunction to halt the merger of the two companies while the commission investigates the deal.

Rochon wrote that the FTC argued in its case that the merger would “substantially lessen competition in the market for accessible-luxury handbags.”

Rochon ruled in favor of the FTC’s stance, writing in her ruling that the “merging parties are close competitors, such that the merger would result in the loss of head-to-head competition.”

“The Court thus finds that there is persuasive additional evidence of unilateral effects of the merger causing anticompetitive harm,” Rochon wrote.

Following the court order, Capri’s stock was down 45% in after-hours trading on Thursday. The company’s stock is down 18% year-to-date.

Tapestry’s stock, however, surged about 12% in after-hours trading.

In response to the judge’s ruling, Capri released a statement saying that it — along with Tapestry — intends to file a notice of appeal to the US Court of Appeals for the Second Circuit.

Tapestry announced in August 2023 that it would buy Capri for $8.5 billion. Under the proposed merger, six high-end fashion brands would operate under one umbrella: Capri’s Versace, Jimmy Choo, and Michael Kors, along with Tapestry’s Coach, Stuart Weitzman, and Kate Spade.

However, in April, the FTC announced a lawsuit to block the merger. The FTC wrote in an April 22 press release that it believed this business move would give Tapestry “a dominant share of the ‘accessible luxury’ handbag market” and “eliminate fierce competition between the two companies.”

“The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing, and advertising,” read the FTC’s April 22 statement.

The FTC added that the deal would impact the companies’ incentives “to compete for employees and could negatively affect employees’ wages and workplace benefits.”

Tapestry and Capri said in an April 22 statement responding to the FTC lawsuit that their companies “face competitive pressures from both lower- and higher-priced products.”

“In bringing this case, the FTC has chosen to ignore the reality of today’s dynamic and expanding $200 billion global luxury industry,” Tapestry said in its statement.

The trade commission celebrated the Thursday ruling.

“Today’s decision is a victory not only for the FTC, but also for consumers across the country seeking access to quality handbags at affordable prices,” Henry Liu, director of the agency’s Bureau of Competition, said in a statement to The New York Times.

Representatives of the FTC, Capri Holdings, and Tapestry didn’t respond to a request for comment from B-17 sent outside business hours.