Written by Siddharth Kavali
NEW YORK (Reuters) – Fashion retailer Tapestry Holdings Inc has room to raise prices and cut discounts on rival Capri’s Michael Kors brand if the two companies merge, a top executive at the company said on Tuesday, as regulators seek to block the $8.5 billion deal.
Tapestry’s brands include: trainer Kate Spade and Stuart Weitzman while Capri also owns Jimmy Choo and Versace.
On the second day of the trial in federal court for the Southern District of New York, the Federal Trade Commission presented slides to support its claim that the merger would lead to higher prices by eliminating competition among competitors.
The slides included Tapestry’s internal consumer research group that Elizabeth Harris, senior vice president of global strategy and consumer insights, sent to CEO Joanne Crevoisier in 2022.
“Coach has been priced an average of $147 higher than Michael Kors over the past two years,” the presentation headlined, suggesting there is room for Michael Kors’ average unit retail price to increase.
Harris responded that she saw an opportunity to raise prices because of the gap between what consumers pay for Coach and Michael Kors handbags, including taxes and fees.
However, she said that doesn’t mean Tapestry will raise prices, pointing to other factors such as the brand’s creative work, design, and material costs in determining pricing. She added that pricing also depends on how Tapestry implements these measures and how much the brand wants.
Another slide showed Harris suggesting that Tapestry lower discount levels on Course products.
Harris acknowledged that the two slides did not mention the additional cost factors when they were presented to Crevoisier. “This was just a quick data pull that we had at the time and didn’t specify what might happen,” he said.
Harris said the presentation was the result of Krevoysrat’s directive to research market dynamics and identify suitable M&A targets, a process that began around mid-2022. She noted that the presentations were created by someone on her team and were part of a “communication” meeting with Krevoysrat in August 2022. She said she never saw the presentation again after it was sent to Krevoysrat.
Tapestry said it does not comment on pending litigation. It pointed to its pre-trial statement that the evidence would show the proposed merger would benefit consumers.
The trial, presided over by U.S. District Judge Jennifer Rochon, is expected to conclude on Wednesday of next week, with closing statements due on Sept. 30.
Tapestry’s lawyers said a ruling could take between one and three months after that.