LONDON, United Kingdom — Jimmy Choo is changing hands. Again. This time, the luxury shoemaker is being acquired by accessible luxury giant Michael Kors from its previous owner JAB Holding Co. for $1.2 billion.

At first glance, Kors and Choo may seem a strange match. Jimmy Choo sells its Molly crushed velvet high heel sandals for $875; Michael Kors sells its Annaliese leather platform sandals for $140. So why the marriage and what does it mean for the future of the two brands?

Former Jimmy Choo investor and former CEO Robert Bensoussan believes Michael Kors is "probably one of the best choices in the market to buy that company and also because they want to keep the company independent." Indeed, both chief executive officer Pierre Denis and creative director Sandra Choi, who has been with Jimmy Choo since its inception, will stay on at the company. "I was afraid it would fall into the hands of a Chinese private equity fund with no experience in luxury and I think John Idol is a successful man who has built a great business with Kors, I think there are a lot of synergies — in bags for Jimmy Choo and shoes for Kors," he says.

For Jimmy Choo, early indications from Idol suggest the strategy set up by management will continue. “They have a pretty formidable plan in place” and Michael Kors will be supporting them to fuel their initiatives, Idol says. The acquisition will mean a renewed focus on growth, however. Michael Kors has already set targets to more than double sales to $1 billion from $470 million, with 10 new retail store openings a year globally, a strengthened online presence and an expanded men’s luxury footwear range. Given the strength of Michael Kors’ handbag business, customers can expect more emphasis on bags too. “Clearly we have a great expertise in that world and we think we can add value in thoughts and ideas and brainstorming with the team to make [handbags] a more important part of the business,” Idol says.

But staff at Jimmy Choo are suffering "fatigue" from the constant change in ownership, according to a source at the company, and are hoping for a stabilisation in strategy. The shoemaker was sold to private equity investors three times before being bought by JAB for £540 million ($800 million) in 2011. In 2014 it was listed, with JAB retaining a majority holding. The British brand was founded in 1996 by Jimmy Choo, a cobbler in London's East End and Tamara Mellon, a former British Vogue employee.

For Kors, the acquisition of Jimmy Choo is part of a broader plan to build an American luxury group — and find new drivers of growth.

There are a lot of synergies: in bags for Jimmy Choo and shoes for Kors.

“We are creating a global fashion luxury group and I admire what LVMH and Kering in particular have done in building a group that has taken brands that have history and heritage and helping foster that growth,” chief executive officer and chairman John Idol tells BoF. “We have identified a focus on international fashion brands that are industry leaders in style and trend.”

The deal will also buoy Michael Kors with a high-performing company with strong margins and a strategy that’s largely already in place, according to a person close to the deal. In recent years, the Michael Kors brand has struggled with over-expansion and a reliance on wholesale vendors, who in turn, have relied on heavy discounting to shift stock, resulting in brand dilution. The brand is attempting a turnaround with new handbag designs to lure more full-price purchases. In May, the US company said it would close more than 100 stores as it reported fourth-quarter sales fell 11.2 percent.

While Europe's luxury groups have focused on long-term brand building, maintaining an "illusion of exclusivity," US luxury houses have chased short-term sales by boosting distribution as wide as possible once a brand becomes fashionable, then suffering the blowback when the brand becomes too ubiquitous and crashes."Today's luxury market is about maintaining the illusion of exclusivity, while selling units by the millions. Shatter the illusion and brand cachet is lost," Luca Solca, head of luxury goods at Exane BNP Paribas wrote earlier this year. "America's large luxury players [have been] sprinting to sell as much as possible, as fast as possible, then suffering the consequences."

Michael Kors' new ambition to add build a group of luxury brands follows a spate of high-profile purchases by Coach Inc, which purchased shoe brand Stuart Weitzman and affordable luxury brand Kate Spade.

“Again, Michael Kors follows the path of Coach — and again on steroids. After a meteoric rise and spectacular crash it is now the time to recycle cash into other brands, with higher residual equity. And again, it is shoes the accessible American brands zero in on,” says Solca.

“I think Michael Kors is trying to build up a portfolio of accessible luxury brands. This development strategy is very similar to the one of Coach, rather than to LVMH and Kering which are focused on true luxury brands. Moreover LVMH and Kering are at a more advanced stage of development: they already control dozens of brands and have central structure to exploit synergies among them,” adds Mario Ortelli, European luxury goods analyst at Sanford C. Bernstein.

For a brand like Jimmy Choo, development into 'fashionable' men's shoes is easier than in handbags.

Idol told investors that Jimmy Choo will build on its 150 stores with new spaces, particularly in Asia which is “underdeveloped.” Men’s luxury footwear is a “hidden jewel” he added, and is Jimmy Choo’s “fastest growing component” while accessories currently account for a quarter of sales.

Idol balks at the suggestion they will repeat the mistakes made at Michael Kors at Jimmy Choo. “We built the company from $17 million (in sales) to $4.5 billion (in sales), there’s not a lot of fashion brands who have been that successful in that period of time,” he says. “Yes I’m disappointed with last year’s result, yet I would caution everyone not to write our epitaph so quickly. It wasn’t about over-expansion, clearly the consumers' behaviour has changed and e-commerce has affected us and what is happening in brick-and-mortar, that absolutely has affected us,” Idol says. For Jimmy Choo, the lessons learnt from the last two years mean they will focus on driving online sales, “so the learning is: be patient, and as luxury and customers [shift to] online, be prepared to be there.”

Extending further into product categories like handbags is an obvious way to increase revenue, according to Ortelli. "It should be executed with maximum attention to avoid the risk of brand dilution.‎ For a brand like Jimmy Choo, I believe that the development into 'fashionable' men's shoes is easier than in handbags,” Ortelli says. “Handbags is a category that is extremely competitive, where brands without a strong heritage in the product category or without strong design can struggle to emerge. The main risk for a brand like Choo is to launch a handbag collection that cannot sustain the same price positioning of its women's shoes and therefore dilutes the brand without bringing significant revenue.”

For his part, Bensoussan is upbeat about the future of Jimmy Choo. “If there is one brand today that can become a lifestyle brand it could be Jimmy Choo. I don’t know many of them that have the strength potential and the brand recognition that Jimmy Choo has.”

As for former Jimmy Choo owner JAB Holding Co., the deal was something of a lucky exit, coming only three months after the Austrian investment vehicle put Jimmy Choo and Swiss leather goods brand Bally International up for sale as part of its exit strategy from the luxury sector after a spate of high-profile purchases. The group's former subisidiary, Labelux, bought and sold the brands of US designer Derek Lam and British jeweller Solange Azagury-Partridge, alongside handbag maker Zagliani which later closed. It still owns Belstaff, the British maker of leather bicycle jackets.

“It is fortunate for JAB Luxury and Jimmy Choo shareholders that such a bidder is there,” says Bensoussan. "The decision to put assets for sale looked like a very long shot, but it is seemingly paying off.”

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