John Idol is bullish on Capri Holdings and its brands — Versace, Michael Kors and Jimmy Choo — but not so much on the business climate in 2023.
The chairman and chief executive officer, who built Michael Kors into a mega business, took the company public and built a luxe portfolio, expects a combination of higher interest rates and COVID-19 restrictions to lead to consumer weakness next year in North America, in Europe and in China.
Speaking at the Morgan Stanley Global Consumer and Retail Conference in New York on Tuesday, Idol said shoppers in North America are “relatively healthy at this point,” but cautioned he expects that to change.
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“We definitely are concerned about next year,” the CEO said. “And we don’t think we’re going to see it probably in this quarter or maybe a little bit into next quarter. But we think kind of the back half of next year, we’ve got to be cautious about what happens to the North American consumer, which has been very resilient.”
Likewise, Idol said he was “quite surprised at how strong the business was in Europe,” but sees the winds shifting.
“We just have this anticipation that that consumer is going to be even more impacted than the North American consumer, in particular, because energy prices are much higher in Europe,” he said. “And they didn’t have the stimulus that came into the economy.”
And in China, where the government’s pandemic restrictions have continued to disrupt the economy, Idol said he was “very pessimistic.”
“While we do see certain measures being pulled back on the COVID-19-zero policy, we think that’s going to take a lot of time,” he said. “We’ve been one of the companies all along saying it’s going to take longer and we don’t think there will be a recovery in China until 2024. At this point, we’re still anticipating negative impact throughout next year.
“We hope that that’s not the case,” he said. “But I think from a prudent planning standpoint, because none of us can really assess what’s happening there clearly.”
What Idol does feel more certain of is Capri’s prospects.
“If we learned anything through the pandemic, it was to be patient, stay focused, just keep building and doubling down on the core values of the great three brands that we have,” Idol said. “And this too shall pass.”
Idol has in the past talked about bringing another European luxury brand on board and took some time at the conference to go over about Versace’s evolution since its $2.1 billion acquisition in 2018.
“When we bought Versace…it had a lot of operational issues and I think one of the great things that Capri has done is we’ve brought tremendous structure to the organization and really cleaned up a lot of the businesses inside the company,” Idol said. “Very importantly, we’ve renovated 60 percent of the store fleet worldwide now. And across the group, we’re in a very good position with our store network in terms of the locations and our leases, et cetera.
“We had kind of set out on our mission of trying to make accessories 50 percent of the business and we’ve gotten just tremendous traction, and we’ve been showing strong double-digit growth in that category every single quarter, almost since we’ve owned the company,” he said.
The next test might be whether Capri can bring in another brand, solidifying its positioning as a “luxury group,” as Idol describes the company.