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Capri cuts sales forecast as Michael Kors demand slows

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Reuters API
Published
today Aug 7, 2019
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Capri Holdings Ltd missed quarterly revenue estimates and cut its full-year sales forecast on Wednesday, as the high-end fashion house struggled with slowing demand for its Michael Kors brand at department stores and at its own retail outlets.


Versace - Spring-Summer2020 - Menswear - Milan - © PixelFormula


Michael Kors, which accounts for the bulk of the company’s sales, still depends heavily on selling through department stores, where sales are struggling as more shoppers choose to buy online.

The brand is also rolling back discounts and inventories at its own stores as it looks to drive more full-price sales.

While the move to sell more at full price drove a better-than-expected quarterly profit, it took a toll on Kors’ store traffic, with same-store sales falling in the low single digits in the reported quarter.

Demand for high-end handbags, Kors’ signature product, has also slowed in the United States in recent months as more shoppers choose to spend their money on retro fanny packs and fashion backpacks, according to analysts at research firm Jane Hali & Associates.

Michael Kors revenue decreased 4.8% to $981 million and sales at Jimmy Choo, Capri’s stiletto brand which is also foraying into handbags, fell 8.7% to $158 million in the reported quarter.


However, Italian luxury fashion brand Versace, which Capri bought last year for about $2 billion to help it tap into Europe’s affluent shoppers, was a bright spot for the company with revenue of $207 million beating 4 analysts’ average estimate of $202.37 million.

Net income attributable to the company fell to $45 million from $186 million, due to a $97 million impairment charge.

Excluding items, the company earned 95 cents per share, beating analysts expectation of 90 cents.

Total revenue rose nearly 12% to $1.35 billion, missing analysts’ average estimate of $1.37 billion, according to IBES data from Refinitiv.

For the full year, Capri expects revenue of $5.8 billion, down from its earlier forecast of $6 billion.

The company, however, backed its full-year earnings forecast of $4.95 per share, which now includes the impact of the recently announced U.S. tariffs on products produced in China.

The unchanged earnings guidance may provide some short-term relief in Capri’s stock, Bernstein analyst Jamie Merriman said, adding that there are still underlying issues in the continued deterioration at Michael Kors.

Capri’s shares, which have fallen nearly 17% this year, rose 4.5% in light premarket trading.

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