Tapestry halts Capri merger efforts, shares pop

Capri Holdings Ltd (NYSE:CPRI) and Coach owner Tapestry (NYSE:TPR) canceled their merger on Thursday after the Federal Trade Commission (FTC) blocked the proposed deal.

The news sent Tapestry shares rising around 5% in premarket trading, while Capri fell 6%. 

The two US luxury brands “mutually agreed” that calling off the merger was in their best interests, given the low likelihood of securing regulatory approval before the deal’s expiration in February.

“With the termination of the merger agreement, we are now focusing on the future of Capri and our three iconic luxury houses,” Capri CEO John Idol said in a statement. “Looking ahead, I remain confident in Capri’s long-term growth potential for numerous reasons.”

The move comes a week after Tapestry announced it paused plans to integrate Capri, following its appeal against a US judge's decision to block its $8.5 billion acquisition of the Michael Kors owner.

The merger faced a roadblock last month after the FTC argued that the deal would eliminate direct competition between the two leading US handbag brands.

While President-elect Donald Trump is anticipated to adopt a more lenient approach to antitrust cases, his victory may have come too late to impact the deal.

Tapestry’s Coach brand, particularly its Tabby handbags, has seen a rise in popularity with younger consumers, supporting gross margin growth for the past eight quarters.

Capri, on the other hand, has struggled, reporting a consecutive decline in sales over seven quarters since the deal’s announcement in August of last year.

Tapestry posted a 27% increase in European sales in the first quarter, offsetting a 5% decline in Greater China.

The company raised its earnings per share forecast for 2025 to between $4.50 and $4.55, slightly up from the previous $4.45 to $4.50 range.

Revenue in the quarter reached $1.51 billion, beating the $1.47 billion estimate compiled by LSEG, while adjusted earnings per share came in at $1.02, surpassing the expected 95 cents.