🇺🇸 All-American luxury

What’s going on here?

Tapestry, the owner of Coach, announced it’s buying rival luxury firm Capri on Thursday – and that could be a stitch in time.

What does this mean?

Tapestry and Capri, both collectors of luxury brands, have faced their share of headwinds, especially with the US’s finicky consumers. And now it seems they’re hoping there’s strength in numbers. See, Tapestry’s laying down a cool $8.5 billion to bag Capri – a price tag that’s about 65% higher than it was worth before the announcement. This fashion fusion brings together six big brands: Coach, Kate Spade, Stuart Weitzman, Versace, Jimmy Choo, and Michael Kors. And the result is a style titan strutting in 75 countries, with yearly sales that make even the ritziest brands blush, at over $12 billion. And the cherry on top: the newly merged firm is eyeing a whopping $200 million in cost savings within three years.

Why should I care?

The bigger picture: B-list bling.

With this merger, the firm’s got its European competitors like LVMH and Kering in its crosshairs. But there’s a catch: even with this power move, it’ll still be playing catch-up to those European elites, who are involved in everything from jewelry and watches to alcohol. And while its new scale should help it boost its brands, Tapestry and Capri’s main clientele aren't the ultra-wealthy caviar crowd, but the ‘comfortable luxury’ lot – who are currently tightening their designer belts a tad.

Zooming out: Ready, set, spend.

One reason for those tightened purse strings is that prices have been on the up and up. But there were more signs of hope last month: US consumer prices rose by 3.2% compared to July 2022, a tad below what the number crunchers predicted. And that little ray of sunshine has got market mavens doubling down on bets that the Federal Reserve will keep interest rates steady next month.

What’s going on here?

Disney reported some mixed results this week – including some slipping streaming figures.

What does this mean?

The Disney+ streaming service continued to lose subscribers last quarter, with the total count falling well short of expectations. A big chunk of that dip was due to losing streaming rights for popular cricket games in India – but despite the dropoff, the segment still managed to cut losses more than expected. Add to that a theme-park business that’s still chugging along nicely, and overall profit actually managed to beat expectations. Plus, Hollywood strikes mean that this year’s content spending is set to be about $3 billion lower than expected. And the firm’s planning to hike the price of its ad-free Disney+ and Hulu subscriptions too, hoping to turn a profit in that segment by next September. That news was music to investors’ ears – and Disney shares jumped 6%.

Why should I care?

For markets: In need of movie magic.

Disney’s banking big on three powerhouses – parks, streaming, and film studios – to drive growth. But while parks and streaming seem on track, the studios are looking a bit iffy. Sure, they’ve scored with “Avatar: The Way of Water”, but “Indiana Jones” and “Elemental” didn’t exactly light up the box office. After all, hefty production and marketing costs make just breaking even a challenge – and that’s not to mention the thorny issue of film quality.

The bigger picture: Channel hopping.

Disney’s traditional TV networks, like ABC, Freeform, and FX, used to rake in about half of the firm’s operating income. But after they took another profit dent last quarter, they might soon be on the chopping block. The firm’s hinting that the networks might not be “core” to Disney any longer – so while the firm’s pooh-poohed ideas about a sale of the whole company to a tech giant like Apple, it’s looking like the struggling networks could be the ones set to go under the hammer.