Tapestry Inc (NYSE:TPR)’s acquisition of Capri will reshape the US luxury landscape, with UK-listed companies Watches of Switzerland Group PLC (LSE:WOSG) and Frasers Group PLC (LSE:FRAS) in a prime position to capitalise on emerging sector trends, reckon analysts at Shore Capital Markets.
The US$8.5 billion (£6.7 billion) takeover of the owner of renowned brands Michael Kors, Versace and Jimmy Choo, at a weighty 55% premium on its three-month average share price, has sparked industry-wide discussions on its implications for the luxury market.
According to Shore Cap, the merger of two iconic American fashion houses aims to challenge European luxury dominance by targeting entry-level luxury consumers, offering a unique “blend of American style and affordability”.
"Despite concerns about weakened US consumer spending due to inflation, this deal taps into the entry-level luxury demand and its potential to benefit from inflation easing," commented Shore Cap.
The luxury sector is known to demonstrate resilience, with high-end consumers driven by aspirational motives, willing to pay a premium for exclusivity.
Within this evolving landscape, Watches of Switzerland and Frasers stand out as potential UK-listed benefactors.
"WOSG's strong performance in the US, hinging more on product availability than just demand, underscores the retailer's momentum and the aspirational nature of luxury timepieces," noted Shore Capital Markets.
Conversely, Frasers, with its Flannels stores, could benefit from Tapestry's focus on entry-level luxury, potentially attracting more customers and enhancing the overall shopping experience.
Shore Capital remains bullish on both companies. "Both stocks' BUY ratings reflect these more favourable market conditions and their strategic alignment with emerging trends in the luxury sector," the broker note stated.
Shore Cap recommends Frasers at a buy price of 799p and Watches of Switzerland at a buy price of 700p.