Capri’s sales remained down in the first quarter, as the strong uplift at Jimmy Choo was not enough to offset the decline at Michael Kors.
The company’s total revenue for the quarter ended June 27 was $769 million, down 3.5 per cent on a reported basis and 4.1 per cent in constant currency.
Michael Kors sales dropped 7.1 per cent on a reported basis and 7.6 per cent in constant currency. Jimmy Choo revenue jumped 10.5 per cent on a reported basis and 9.3 per cent in constant currency.
According to GlobaData MD Neil Saunders, Michael Kors needs to repair years of bloated assortments, scattergun distribution, and a generally confused position.
“That’s a tall order, and there is no doubt that major surgery is needed to restore the brand to health – meaning things may get worse before they get better,” he said.
The analyst attributes part of the decline to Capri’s move to pull back on lower-quality distribution and sacrifice those sales in the name of brand integrity. This was somewhat effective, as the brand’s gross margin increased by 280 basis points during the period.
However, some of the decrease is still due to the brand being seen unfavorably by consumers, he continued.
“The biggest issue remains the disconnect between the expression on the runways and what people see in stores,” Saunders said.
“The catwalk collections are sophisticated and interesting – with, for example, appropriate nods to soft tailoring and relaxed elegance this season – but this is not what comes through in stores, including Michael Kors’ own shops. Here, the brand feels more like a commodity with a jumble of uninspiring styles and brand staples that have been around for quite some time.”
The analyst said the recovery has to come from presenting a much more clearly defined brand image and building collections that feel aspirational and interesting.
“There needs to be a much stronger connection to culture and events, to pique interest – especially among younger consumers. All of this will take time, as consumer perception can sour quickly, but it rarely recovers at a rapid pace,” he said.
On the bottom line, Capri’s net income rose from $56 million a year ago to $69 million.
Management said the second-quarter results exceeded their expectations and demonstrated the progress the company is making to build a stronger and more profitable business.
For the balance of FY27, they expect Jimmy Choo to continue to grow and return to profitability, while Michael Kors’ outlook will be hurt by lower inventory levels, softer trends in EMEA and headwinds from currency exchange.
Full-year revenue is now forecast to be approximately $3.4 billion, slightly down from last year’s $3.47 billion.
