There Isn’t Just One Way to Build a Conglomerate

With Coach acquiring Stuart Weitzman two years ago and Kate Spade this past May; Michael Kors scooping up Jimmy Choo earlier this year, and talk of more deals to come, one of the conversations that has been dominating the industry is conglomerate-building, and namely, who – if anyone – can create the American equivalent of LVMH.

Coach and Kors – which the New York Times stated in July are “clearly willing to spend on acquiring brands [and] seem to be headed for an arms race” as to which can shed their accessible luxury names in favor of a move upmarket – appear to be likely candidates in the fight to conglomerate-ize. While Kors CEO John Idol said the brand has only “one or two more acquisitions in its sights for now, he did say they are looking at luxury brands and that their future plans “are not going to be something small.

Coach’s chief executive officer, Victor Luis, has “also been open about his ambitions for more acquisitions,” the Times wrote this summer. Rumors of a Burberry acquisition were looming not too long ago, if you recall. And just this week, Coach, Inc. announced that it is rebranding as Tapestry, Inc., thereby further making known its plans to become “the first New York Fashion Group.”

The name-change, according to the Times, will “better express [the group’s] new shape as a multi-brand entity with a variety of unique properties, as opposed to one dominated by a single brand.” This is some conglomerate building language, no?

As for whether these potential handfuls of acquisitions and a name change for Coach – err Tapestry – will pit Kors and Coach against the likes of LVMH – which owns over 50 brands, including Louis Vuitton, Givenchy, Loewe, Dior, and Celine, etc., following a corporatizing-fashion spree beginning in the 1980’s – or the similarly situated Kering and Richemont, seems unlikely, at least for now due to the sheer size differential between the all-mighty European conglomerates and well, everyone else. That does not mean that those on American soil are not trying, though.

It also does not mean there is only one way to build a conglomerate. (Although given the success of the market’s giants Kering (nee PPR) and LVMH, their way – which includes the 1987 $4 billion merger between Louis Vuitton and Moët-Hennessy and the subsequent flurry of acquisitions: Givenchy in 1988, Berluti in 1993, Celine and Loewe in 1996, Marc Jacobs in 1997, etc. – seems to be controlling). 

There is another approach, a growingly popular one – and Assembled Brands, the parent company of four New York-based brands, The Line, Protagonist, Khaite and Tenfold – is just one of the entities trying it on for size. Launched in 2013, Assembled brands – the brainchild of Adam Pritzker, a member of Hyatt hotel family, and stylist/consultant Vanessa Traina – is building its own brands.

Describing itself as “a modern holding company transforming emerging design companies into enduring brands through resources that lower operating costs and increase revenue, allowing designers to focus on product above all else,” Assembled Brands is well on its way to creating something big in the name of American fashion - but can it or the likes of Michael Kors really compete? 

It seems one of the defining features of a conglomerate worth writing home about is the presence of “stars," which LVMH chairman Bernard Arnault emphasized quite a few years ago now in speaking to the group’s acquisition strategy. He told Cathy Horyn - when she was still at the New York Times: ''Our strategy is to have some stars and there are not many stars in the luxury business. is a star? It's a name that is the very best. It's a name that is very profitable. But the number of true stars is less than I can count on both of my hands." 

The presence of such "stars" on a conglomerate's - or wannabe conglomerate's - roster might just be the defining factor. It is these brands, after all, that tend to carry - and well, make such conglomerates possible. As Horyn wrote in 2001, "Mr. Arnault does have at least a few of those stars in his empire, which he has been building since he became chairman in the late 1980's. But in his relentless acquisition spree, he seems to have picked up some damaged goods, leaving him more dependent than ever on the brown-and-tan leather goods of Louis Vuitton - which already supplies about half the company's profits." 

The defining feature, it seems, is not how you built your conglomerate - but what you've got to show for it. In this sense, Michael Kors and Tapestry - along with some of the budding young collectives - have some work to do ... regardless of how they do it.