CPRI stock: Could Prada’s acquisition of Versace revive sagging luxury goods segment?

Although it’s not quite a done deal, insiders say Italian fashion house Prada S.p.A. has reached an agreement with U.S.-based Capri Holdings Ltd. (CPRI) to purchase the Versace brand for roughly $1.6 billion.

CPRI stock finished Monday 3.87% higher.

After spending much of 2024 on an upswing, luxury stocks entered the new year with growing uncertainty due to mixed economic signals and shifting consumer preferences.

In January, BofA analysts said high-end brands should shift away from “quiet luxury—a trend that dominated the market for years now. They believe this shift could win back increasingly cost-conscious consumers while addressing counterfeiting.

"'Quiet luxury' is still in fashion," wrote BofA analysts in a January note to clients. "But it has created lower barriers to entry/scale and fueled copycats/dupes."

It remains to be seen what comes out of the Versace-Prada deal and how it could impact Prada's strategy. But there’s no question that the acquisition comes at a pivotal time for the once red-hot sector.

Tumultuous timeline

Optimism within the segment hit a recent high in August, boosted by a rise in consumer confidence. That was followed by a September slump that wiped out an enormous amount of value across Europe’s luxury market.

By October, decreased demand in China was deflating the industry on a global scale.

This year seemed to usher in a new era of realism among analysts who see the prospect of continued growth, albeit likely at a lower rate than investors saw during the 2024 surge.

McKinsey’s ‘State of Luxury: Fashion’ report from January projected annual growth in the global luxury market of between 1% and 3% until 2027. The U.S. is expected to see the highest growth rate, followed closely by China.

Specific luxury segments — particularly luxury jewelry and leather goods — could outpace the larger market with growth between 4% and 6% over the same period.

With uncertainty dominating discussions about tariffs, inflation, interest rates, and other key issues, it’s worth noting that luxury goods have traditionally been more resilient to economic downturns than many other segments.

In fact, November marked the first time the industry shrank in 15 years.

As Bain & Company partner Claudia D’Arpizio advised during the most recent slowdown, luxury goods companies must “readjust their value propositions” to re-attract some of the millions of consumers who have either voluntarily left the luxury sector or have been priced out of it.

Any rising market must be able to adapt to changing conditions. The ability — or inability — of luxury brands to do that in 2025 will likely have a much bigger impact on the market than whether Versace changes owners.

Still beating the S&P 500—for now

In the past six months, America’s 14 largest publicly-traded luxury companies, including CPRI, delivered stronger returns than the broader market, according to Yahoo Finance data.

Over that period, these companies outperformed the S&P 500 index’s gains by more than 20% as of Monday evening. However, the lead of high-end goods producers is narrowing.

After a major dip at the beginning of February, the sector’s one-month performance has been on par with the S&P with both shedding just over 3%. Things got even worse for the industry on Monday, with luxury goods falling another 3.3% for the day even as the S&P 500 gained more than 2%.

The recent trajectory might be too much for even Prada and Versace to reverse for now.