Prices are rising for Versace, Jimmy Choo and Michael Kors as parent company Capri Holdings takes them further upmarket.
In a Nutshell: “Revenue and earnings results significantly exceeded our original expectations,” John D. Idol, chairman and CEO, said. “Additionally, we generated strong free cash flow and returned $650 million to shareholders in Fiscal 2022.”
In a conference call to Wall Street analysts, Idol said all three brands added a combined 11.5 million new customers over the past year.
Versace, at luxury’s opening price point, will see its “first big price increase” this fall with an even greater “opportunity to go up significantly,” Idol said.
He further took aim at Jimmy Choo’s underpriced product line. “We have taken two very large price increases. We have another one coming for the fall season” that will propel the label into “true luxury” prices,” he said, citing “absolutely no pushback” from customers.
Michael Kors has raised prices in the 5 percent to 7 percent range, with additional increases in the pipeline. “The delta between where Michael Kors is and the luxury world continues to widen. So we believe that that will continue to have a pathway for us to raise prices as we elevate the brand,” Idol said.
Capri is out of the promotions cycle, and for Kors, raising prices and relying more on full-price sales and less on discounting are part of “trying to change the perception of what Michael Kors is” as the company repositions it “further upmarket,” Idol said.
Net inventory was up 48.9 percent in the quarter to $1.2 billion as a strategic move to bring in more core and basic products mostly for Michael Kors and Jimmy Choo. Capri also tweaked its design calendar to mitigate supply chain issues.
“We keep saying we could have done more business had we had the inventory. Well, the first place that we’ve been out of inventory almost for two years is on our core replenishment product. And so we think we’re going to be in really good shape now,” Idol said.
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Net Sales: Total revenue for the three months ended April 2 rose 24.6 percent to $1.49 billion from $1.20 billion.
Revenue by business for the quarter saw Versace up 34.0 percent to $315 million, Jimmy Choo increase 25.8 percent to $156 million, and Michael Kors climb 21.8 percent to $1.02 billion.
Versace’s women’s accessories sales rose 75 percent versus year-ago results, marking “significant progress in our goal to expand accessories revenue to $1 billion over time,” Idol said. Footwear and strength in men’s and women’s ready-to-wear, with sales up in the double digits, were the quarter’s highlights.
“Glamour performed well reflecting the continued success in dress footwear, with sales driven by a return-to-office, and social activities,” Idol said of Jimmy Choo. “We were also pleased the bridal sales were more than doubled prior year, as this is often the first touch point to the brand.” Also doing well were casual sandals and boots, suggesting it can eventually reach $1 billion, he added.
Michael Kors outpaced expectations, with Signature—representing 45 percent of the assortment mix—part of the brand’s core growth strategy, Idol said. Women’s ready-to-wear also did well, and men’s remains one of the best performing categories in retail, driven by Signature accessories.
MK Go, started before the pandemic, has become a “very sizable business for us,” Idol said. Although Capri dialed back the casual business when consumers starting dressing up again, Idol said Kors is not walking away from the “very healthy” MK Go business.
For the year, revenue rose 39 percent to $5.65 billion from $4.06 billion. The year included $70 million in sales for the 53rd week.
Earnings: The company returned to the black with net income of $81 million, or 54 cents a diluted share, against a net loss of $183 million, or $1.21 a diluted share, in the year-ago quarter. Adjusted diluted earnings per share (EPS) was $1.02.
Wall Street was expecting adjusted diluted EPS of 82 cents on revenue of $1.41 billion.
For the first quarter, the company guided diluted EPS to $1.35 on total revenue of $1.3 billion. Second quarter was projected at $1.60 for adjusted EPS on revenue of $1.43 billion. Third quarter was estimated at $2.55 for adjusted EPS on revenue of $1.73 billion, while fourth quarter was guided to adjusted EPS of $1.35 on revenue of $1.50 billion.
For the full year, Capri is projecting diluted EPS of $6.85 on revenue of $5.95 billion, or up 5 percent from the prior year on a reported basis. By business, Capri guided Versace’s total revenue to $1.23 billion, Jimmy Choo at $650 million and Michael Kors at $4.08 billion.
For the year, net income was $822 million, or $5.39 a diluted share, against a net loss of $62 million, or 41 cents, in the year-ago period.
CEO’s Take: “We think Fiscal ‘23 is going to be another very strong year for our company,” Idol said, adding that the company”reported its highest revenues, gross margin and earnings per share in its history this year. So we believe we have a very strong platform with our three luxury brands—Versace Jimmy Choo, and Michael Kors—to continue to grow in the luxury market.”