John Idol declared Capri Holdings’ transformation into a luxury player complete.
Now the chairman and chief executive officer just has to navigate a touch-and-go economy, foreign exchange headwinds and some very large competitors to deliver on his targets.
At an investor day in New York on Wednesday, Idol said the firm was marching toward $8 billion in revenues with adjusted earnings per share growing at a double-digit clip — with Versace, Michael Kors and Jimmy Choo all contributing.
It’s been a long road for Idol, who took the reins of Michael Kors in 2003, built the designer brand into a major business and then bought Jimmy Choo in 2017 and Versace in 2018, when the company was renamed Capri.
“Five years ago almost to the day, we announced our intent to become a global luxury fashion group. I believe we have successfully made that transition,” Idol told analysts at the meeting. “We decided to move from a mono brand to a multibrand portfolio company with an emphasis on luxury because luxury companies have historically had consistent growth over multiple years. So the industry has basically grown at a midsingle-digit [compound annual growth rate] over the last 20 years.”
Over the long term, Michael Kors’ revenues are projected to increase by just over $1 billion to $5 billion as Versace is seen adding another $900 million to $2 billion and Jimmy Choo is expected to add $387 million to hit $1 billion.
“We are more confident than ever right now in our three luxury houses and what these brands stand for and what they mean to our consumers,” said Idol.
The CEO set Capri on its current course before the pandemic started and he stressed that the company would continue to push its brands and luxury positioning even if the economy takes a turn for the worse.
“I think everyone is waiting with bated breath about what is or isn’t going to happen, we don’t know,” Idol said. “I think we are sitting in a good situation for the moment because there’s a lot of reopening still happening. There’s a lot of people saying, ‘I want to get out. I want to go to a party.’…People are returning to work.…We’re seeing especially a lot of younger people enjoying coming back.”
But with supply chains still backed upped, the war in Ukraine, runaway inflation and a sinking stock market, consumers could change their tune quickly.
“We will get through whatever it is,” Idol assured Wall Street. “We got through the pandemic, I promise you we will get through a recession. There’ll be bumps. And I know there’s going to be a bump somewhere; we just don’t know where it is. But we’re very conservative on the way we manage our cash. We are very focused on our profitability.…We’re probably not sitting here and thinking if there’s a 20 percent drop in the business. That’s not the way I would say we look at it. Could we not be up 3 percent or 4 percent or 5 percent in revenues and maybe it’s a little less than that. I think that’s more of our thought, the way that we’re going to look at things.”
Regardless, he said the company would continue to invest in the business.
Thomas Edwards, executive vice president, chief financial officer and chief operating officer, said Capri planned to spend $300 million annually to support growth — with half of that going to stores.
Michael Kors, for instance, plans to open a 14,000-square-foot flagship in New York with another in London and also a new location in Milan.
Edwards said the priorities were to first spend on the business and then buy back shares, repay debt and, finally, consider another luxury acquisition.
If Capri does do another deal, Idol said he’s willing to pay up to get the right brand.
“I recall many people being surprised at what we paid for Jimmy Choo [$1.2 billion] and for Versace [$2.1 billion],” the CEO said. “I want to remind everyone, in the luxury business, that’s what you pay. If you don’t pay that, someone else will pay. So it doesn’t really matter whether you like it or not. That’s what the price is.
“We do believe that there will be some three companies over the next two to five years that will be available,” he said. “Most of them are privately owned luxury businesses in Europe.”
The idea would be to buy a company with at least $500 million in revenues and the potential to get to at least $1 billion.
But for now, Idol is clearly most interested in building at home.
“We have $2 billion of opportunities sitting in front of us, and we think to stay focused on that will provide tremendous upside,” he said of the current business.
That seemed to be enough for investors — for now — as shares of Capri gained 4.1 percent to close at $48.18, giving the the firm a market capitalization of $6.9 billion.