Here’s what comes next for Tapestry and Capri after the death of their major fashion merger

When it was announced last year, the acquisition of Capri by Tapestry was touted as a way to bring several famous brands under the same roof. Tapestry owns Coach, Kate Spade, and Stuart Weitzman, while Capri owns Michael Kors, Versace and Jimmy Choo. The hope was to create an American mini-version of French luxury conglomerate LVMH, albeit one more focused on so-called “affordable luxury.”

But the news was followed by objections from anti-trust regulators. In April, the Federal Trade Commission sued to block the deal, arguing that it would “give Tapestry a dominant share of the ‘accessible luxury’ handbag market.” And a decision by a federal judge last month made their union all but impossible.

The deal may be over for both companies, but the path forward for each looks very different. While Tapestry remains in relatively good shape, Capri’s journey looks to be much more arduous, particularly because it appears to have gone on autopilot since the deal was announced last year. The company “has been badly managed and has neglected its brands in the belief that a merger would happen,” Neil Saunders, managing director at GlobalDate, wrote in a research note. “Capri now faces walking the long road to recovery alone.”

A tale of two companies

Tapestry and Capri each had their reasons for wanting to join forces.

For Tapestry, which gets 76% of its revenue from Coach, a mature brand, the goal of the merger was to find new sources of growth. For Capri, Tapestry’s strong data, marketing and real estate capabilities, would have potentially helped Michael Kors, Versace and Jimmy Choo end their long-time slumps.

But market reactions to the failed merger have been different for each company. Capri’s shares are down almost 80% from a decade ago, and fell further on the news that the acquisition fell through. Tapestry, meanwhile, saw a 9% stock bump on Thursday, with investors and analysts feeling that the company had dodged a bullet. “Tapestry would also have inherited a whole host of problems from multiple broken brands and, while it could likely fix these, it would have sapped a great deal of time and resource,” Saunders wrote.

Tapestry’s recent results bear that out. Coach, which underwent a painful but ultimately successful turnaround a few years ago, managed to show growth, albeit modestly, in its most recent quarter despite the ongoing pullback in luxury spending. Compare that to Capri, which last week reported Versace and Michael Kors saw double-digit percentage declines in its most recent quarter.

Tapestry CEO Joanne Crevoiserat told Fortune that her company will be doubling down on the labels it already owns. “Our focus is on the strength of our current brands and controlling the things we can control,” she said at Fortune Global Forum on Tuesday. Crevoiserat added that she sees “incredible runway for our existing brands.”

As for Capri, CEO John Idol said in a press release on Thursday that he was confident in the company’s long-term future, pointing to its network of stores, a “robust digital platform” and an extensive wholesale network.

Moving forward, Wall Street is speculating that Tapestry could potentially buy individual brands, either from Capri or elsewhere, rather than try a mega-deal. Speaking in general terms, Crevoiserat told Fortune this week that “this is a platform that we add brands to and deliver value for those brands.”