Capri Holdings Ltd, the parent company of luxury brand Michael Kors, has revised its sales and profit forecasts for the holiday season. The main reason for this adjustment is the slow demand recovery in China, which continues to be impacted by Covid-19 restrictions and uncertainty surrounding the global economy. The company faces challenges in China due to sporadic business and movement restrictions caused by Beijing’s “dynamic zero-Covid” policy.

In the second quarter, Capri’s revenue from mainland China fell by a high teens percentage, and recent store traffic slowdowns have worsened the situation. While the company did not disclose its total revenue from China, the region is typically the third largest market for luxury companies, following the United States and Europe. This decline in sales in China has also been experienced by other luxury brands like Gucci and Canada Goose.

Interestingly, the demand for Michael Kors products is also slowing at U.S. wholesale retailers. Analysts suggest that affordable luxury brands like Michael Kors are likely to feel the effects of an inflation-induced slowdown in demand before more premium brands like Versace. As a result of these challenges, Capri has adjusted its holiday-quarter sales forecast from $1.65 billion to $1.53 billion, and its profit outlook from $2.45 per share to $2.20 per share.

Despite the revised forecasts, Capri’s shares rose by approximately 2%. This is due to the fact that the company exceeded earnings estimates and announced a new $1 billion share buyback program. The introduction of the buyback program suggests that Capri has confidence in its ability to navigate the challenges it faces and create value for its shareholders.

Useful links:
– [Goldman Sachs: The Impact of Covid-19 on the Luxury Goods Sector](
– [BBC: Challenges and Opportunities for Luxury Goods in China](