Luxury firm Capri Holdings has no plans to “Americanize” Versace and Jimmy Choo, the posh fashion players it acquired to form a modern maison alongside Michael Kors.
At Goldman Sachs 27th Global Retailing Conference Thursday, CEO John D. Idol highlighted Capri’s “extraordinary assets.”
“We’re in the luxury space,” he told investors, adding, “We’re not running brands. We run luxury houses.”
Though Idol admitted the coronavirus pandemic “will set us back 12 to 18 months” like virtually every other player operating in the space, that’s a reasonable span given the time needed to nurture a luxury house. And while revenue will suffer a 35 percent dip this year given the shaky economic landscape, Idol believes Capri can flourish into a “$7 billion business” if it pulls the right levers.
Closing in on 42 years in operation, Versace has the moxie to top $2 billion in annual volume over the next two years, according to Idol, who pointed out plans to expand the luxury label’s store base to 300 doors (its currently in more than 200) and grow footwear and accessories to 60 percent of revenue.
Jimmy Choo, which will reach its quarter-century milestone next year, is also set to plant its flag in 300 stores worldwide, while looking to accessories to drive 50 percent of revenue. Idol said the shoe maker will evolve from its staple dress footwear and reinvest in the luxury sneaker business, with an eye on reaching $1 billion in annual volume.
With four decades in fashion under its belt, the Michael Kors brand is on track to meet its goal of reaching more than 50 million active customers, 10 million more than it has now. The brand has plans to double its revenue in Asia, as well as expand its men’s business, which Idol described as “under penetrated.” The Kors e-commerce business is growing faster than expected, to almost double where the operation was last year, Idol said, describing the full-price retail business as “quite healthy” as customers have responded to newness in stores.
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Like many in retail, Michael Kors plans to scale back its North America physical footprint and refocus on e-commerce, because “that’s just the way the consumer wants to shop,” Idol said, noting a goal to slash wholesale to just 20 percent of total business, down from about one-third a year ago as partners go bankrupt and close stores. Shutting 150 units of its own, the American aspirational luxury label aims to whittle down its brick-and-mortar network to around 700 stores primarily across North America, while also opening locations in Asia.
Idol pointed out the surprising purchasing trend that emerged when the coronavirus crisis erupted: bigger bags. “Prior to Covid, we had been seeing a shift to smaller bags [for almost three years and that] hurt the Michael Kors business,” he said. “Quite frankly, what has happened during Covid, and our AURs (average unit retail) have gone up, is we’re selling larger bags.” Totes and backpacks are the new favored styles, Idol added, because even though many consumers aren’t back in the office, they need sufficient space to stash pandemic staples like hand sanitizers, face masks and gloves while they’re on the go.
But the one thing that keeps Idol up at night—beyond staff safety—is the non-existent retail travel business that evaporated in the blink of an eye. It’ll take a “minimum of 12 to 18 months for the travel retail business to recover,” and the firm doesn’t “see any kind of significant recovery today or any time in the near future.” The catastrophic travel slump represents Capri’s biggest hurdle in the next year and half. Even with a vaccine, should one be available soon, Idol expects tourism in big cities is unlikely to recover for well more than a year.
If there’s good news for the luxury firm, it’s coming out of China, where traffic patterns have been healthy, in addition to improvements in Japan, Korea, Malaysia and Singapore. North America is Capri’s next biggest market after Asia, and for now European traffic remains challenged as most tourist capitals have yet to bounce back.
“It’s going to be a considerable amount of time until [the tourism business] heals. In the meantime, we’re going to focus on local markets,” Idol said. “We’re seeing very good business in North America.”