Capri Holdings, the parent company of luxury fashion brands Michael Kors, Versace, and Jimmy Choo, has reported a decline in total revenue and profits for the latest quarter. The decrease in revenue can be attributed to the decline in retail demand caused by the ongoing pandemic. However, the company remains optimistic about its future prospects, especially with the strong recovery of Chinese demand.

In the second quarter, total revenue dropped from $1.44 billion to $1.11 billion compared to the previous year, while adjusted net income fell from $122 million to $73 million. Despite this decline, Capri Holdings is now predicting a 30% drop in revenue for the year, which is an improvement from its initial projections. The company expects a further improvement in the third quarter and a significant recovery in the fourth quarter, taking into consideration temporary store closures in Europe.

Chairman and CEO John D Idol expressed his optimism about the luxury fashion industry, highlighting its resilience and the emotional connection it establishes with consumers. He mentioned that luxury sales are rebounding rapidly, and suggested that reduced spending on experiences due to travel restrictions might be leading to increased spending on luxury products.

While Capri Holdings faced weaker performance in Europe and the Americas, it is experiencing a faster recovery in Asia, particularly in Mainland China. All three of its luxury brands are seeing positive sales in their retail channels in China. The Americas are also recovering well, albeit at a slower pace. Versace has achieved double-digit sales growth, while Jimmy Choo and Michael Kors have seen single-digit growth.

Analyzing the performance of each brand, Versace reported a revenue decline of 14% in the quarter, partly due to delayed reporting as June was still affected by store closures. However, the brand experienced strong growth in global e-commerce sales and in its retail channel in Mainland China and the Americas. The fragrance sector also saw a notable improvement during the quarter.

Jimmy Choo’s revenue declined by 2% to $122 million. Nevertheless, the brand observed promising growth in e-commerce sales and retail sales in Mainland China and the Americas. Its expanded accessories assortment, particularly totes and mini bags, performed well, while footwear, especially trainers, continued to outperform. The brand’s collaboration with Timberland resulted in a sell-out of its crystal-embellished version.

Michael Kors recorded a revenue decline of 27% to $793 million compared to the previous year. However, the brand’s retail sales showed sequential improvement, and the pace of recovery is encouraging to the company. E-commerce sales and retail sales in Mainland China also experienced significant growth. Michael Kors continues to perform well in signature accessories, large handbags, totes, and backpacks, as well as in the men’s business segment.

Capri Holdings is optimistic about the future and anticipates Jimmy Choo’s revenues to increase by approximately $500 million in the coming years. Despite the challenges posed by the pandemic, the company remains resilient and confident in the enduring appeal of the luxury fashion industry.

Useful links:
1. CNBC: Capri Holdings says beating estimates on Chinese demand for luxury goods as shares surge
2. Bloomberg: Capri Rallies as CEO Sees Luxury Returning Stronger Than Before