Michael Kors is likely to continue its shopping spree.
Earlier Tuesday, the company said it would buy luxury, London-based shoemaker Jimmy Choo for $1.2 billion.
“This will not be [Michael Kors’] last acquisition,” CEO John Idol told CNBC in a phone interview shortly after the deal was announced.
Idol reiterated that Michael Kors is focused on forming a “luxury group,” as the the company laid out in its “2020 plan,” a strategic move with the goal of returning to growth by 2018.
But investors didn’t appear to be welcoming the news entirely on Tuesday. Michael Kors’ shares sank more than 4 percent, as some on Wall Street worried the deal may add to the retailer’s own struggles of late.
Kors has seen its same-store sales drop in recent quarters, with fewer shoppers flocking to brick-and-mortar department stores to ring up big purchases. Additionally, the retailer’s core handbag business has slowed, with competitors rolling out heavier discounts and promotions, luring women to shop for steals.
Pressure really hit Kors in May when rival Coach agreed to buy Kate Spade in a deal valued at $2.4 billion.
In a statement Tuesday, Michael Kors described itself as “the ideal partner” for the Jimmy Choo brand.
“[Jimmy Choo] isn’t a company we have to do a turnaround or significant change in the product or marketing strategy,” Idol later told CNBC.
The British shoe brand is known for its stiletto heals and accessories and sells worldwide in cities from London to Paris, New York to Tokyo. Jimmy Choo was put up for sale in April after its majority owner, JAB Holdings, signaled its intention to focus more on food and beverage brands in the wake of its acquisition of Panera Bread.
However, according to BMO Capital Markets analyst John Morris, Jimmy Choo’s 2016 same-stores sales were down 0.8 percent, and wholesale channel revenue fell 3.9 percent on a constant currency basis last year.
Morris expects cost savings from the deal with Michael Kors will be hard to come by as the two brands have very little overlap in manufacturing and distribution. As a result, he said he was “hesitant to approve” Michael Kors’ plan.
Still, Michael Kors sees opportunities for growth as it diversifies its products and expands globally. The two brands — Jimmy Choo and Kors — will continue to operate separately, Idol said, as both look to grow in the areas they know best.
“We think there’s an opportunity to grow [Jimmy Choo’s] accessory business, for sure,” Idol told CNBC. “Beyond that, the men’s footwear business is one of the fastest growing businesses they have, [and] they are one of the leaders in that.”
The deal should take Michael Kors’ total footwear revenues from 11 percent of sales to 17 percent, he said.
As Michael Kors looks to gain a leg up in luxury retail, the backdrop for companies operating in the sector today is quickly evolving.
“E-commerce is changing everything… you are spending less time in stores,” Idol said. Thus, his company is trying to be “careful” about when and where it opens brick-and-mortar locations. And having a digital presence is a must.
“[Michael Kors is] one of the largest accessories companies in the world,” Idol said Tuesday. “We have two industry leaders with this [Jimmy Choo] deal. … We feel that the luxury space is the best opportunity long-term.”