 US designer label Michael Kors has sold a minority stake to a group of investors in a deal that values the brand at a $2.5 billion. According to the New York Post, Kors hired Morgan Stanley this spring to raise $500 million in growth capital.
The investment will be used to foster international growth, opening new stores and raising the brand's profile in Europe and Asia.
Tom my Hilfiger is thought to be among the investors.
A $2.5bn valuation for Michael Korst is 25 times the label's earnings before interest, taxes, depreciation and amortization. By comparison, Italian fashion giant Prada's IPO this spring fetched a valuation of about 20 times Ebitda.
"This is luxury's day," said Richard Kestenbaum of New York investment bank Triangle Capital. Fears of a double-dip recession notwithstanding, demand for designer merchandise with fat price tags continues to climb, he said.
Critics say the company's rise has been remarkable given that the 52-year-old designer founded it only eight years ago, following a post as designer for Celine, the French fashion label owned by European luxury behemoth LVMH.
Looking ahead, "there are very few brands that are performing on the scale of Michael Kors, and that have as much room left to grow in different channels and parts of the world," said Kestenbaum.
Michael Kors has more than doubled in size during the past four years and is cranking out profits despite the costly expansion of its retail chain, which this spring added a 7,000-square-foot Paris boutique on Rue St. Honore. With more than 100 stores worldwide, Michael Kors plans to double that figure in 2012.
The growth has been pushed by bigwig fashion financiers Silas Chou and Lawrence Stroll, who brought Tommy Hilfiger public in the early 1990s after taking it private just a few years earlier.
In the meantime, the designer and his chief executive, John Idol, are churning out clothing and handbags that appeal to "aspirational" shoppers who, one tier below the super-wealthy luxury crowd, are likewise attracted to brands like Coach and Ralph Lauren.
Image: Michael Kors Fall 11 campaign
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