The fashion firm — which includes the Michael Kors, Versace and Jimmy Choo brands — revealed its post-COVID-19 playbook Tuesday during its planned investor meeting. The formula includes paying down debt; opening more stores; growing the accessories business across the portfolio; attracting new, younger shoppers, and possibly more acquisitions.
“With greater visibility into the path of the global economic recovery, we now have even more confidence in the future and believe our three luxury houses position Capri Holdings to deliver multiple years of strong revenue and earnings growth,” said John D. Idol, Capri’s chairman and chief executive officer.
Also on Tuesday, the company raised its 2022 fiscal year revenues and adjusted earnings-per-share outlook. Capri is now anticipating full-year fiscal 2022 revenues to be about $5.15 billion, up from the previous estimate of about $5.1 billion. The company credits better-than-expected first-quarter sales trends for the revised outlook. In addition, Capri has adjusted its expected fiscal 2022 earnings-per-share to be between $3.80 and $3.90, up from the prior guidance of $3.70 to $3.80 a piece.
To get there, Capri executives laid out some lofty plans for analysts during the investor meeting, such as growing the accessories business to about 50 percent of total revenues across the portfolio and opening more stores.
“We are an accessories-led company first,” Idol told analysts virtually, pointing out that while ready-to-wear apparel will continue to be an important part of Capri’s growth strategy, the company will focus on small leather goods and handbags, as well as brick-and-mortar real estate.
“Stores are a vital part of our ecosystems,” Idol said. “They really bring our jet set lifestyle to life. We very much believe in brick-and-mortar.” The retailer ended the most recent quarter with 1,257 stores, including 820 Michael Kors, 227 Jimmy Choo and 210 Versace locations.
By brand, Idol said the most growth opportunity lies in Versace, which the company has previously set goals to grow to $2 billion in revenues. This year, Idol said, Versace’s revenues will likely be around $1 billion, thanks to its expanded accessories category, growing Asian business (anticipated to grow to around $700 million in revenues) and increasing the store fleet around the world.
“The majority of revenue [from Versace] will come from stores,” Idol said during the event, adding that Versace’s “store fleet is underdeveloped compared to our luxury peers. We’re going to renovate the entire fleet by 2025.”
At Jimmy Choo, in addition to expanding the accessories business — from 20 percent up to 30 percent this year — the footwear business will also include a small selection of ready-to-wear and beauty. Jewelry is coming in March 2022.
“We think we have a pretty big opportunity there and consumers are responding to it,” Idol said.
Much like Versace, the CEO added that Jimmy Choo’s store footprint is under-penetrated compared with competitors, and opening more stores will help the brand grow revenues to roughly $650 million by fiscal year 2023.
“At Jimmy Choo we have an excellent store fleet; the growth there will mainly be with new store openings,” Idol said. “Longer term we think we can generate $1 billion in sales [at Jimmy Choo].”
Other growth drivers include increased development of the Asia business and the company’s plans to triple Jimmy Choo’s e-commerce revenues in the next year to around $250 million.
“We create consumer desire and engagement,” Idol said. “Consumer communication uses analytics and data to convert and capitalize on consumer desire. It’s much more targeted. Every day we analyze how people interact with our social channels. We then use this data to target consumers. We expect that we will reach 75 million customers in the near future.”
Regarding Michael Kors’ product categories, the largest opportunities are in signature products, the MKGO collection and the men’s division.
While the group plans to grow Michael Kors’ signature collection to about 50 percent across all product categories (up from 30 percent, helping drive $2 billion in revenues), Idol added that the other two businesses — MKGO and men’s — are high-margin businesses.
“They’re not going to cannibalize the accessories business,” he explained. “It’s another way to engage with consumers with Michael Kors as a lifestyle brand.
“We believe signature is fashion,” Idol added. “It drives brand identity, as well as drives loyalty.”
“A very big part of the cap ex will go toward the renovation of Michael Kors stores, especially in North America, while closing underperforming stores in North America and opening new stores in Asia,” Idol said.
For the full fiscal year, the company is now expecting revenues to be around $4 billion — flat compared to last year, or down from $5.5 billion in 2020’s pre-pandemic fiscal year — with the biggest growth opportunity in Asia and slight declines in North America.
Investors seem unsure of how to react to the plan. Shares of Capri teetered between positive and negative during Tuesday’s trading session, ultimately closing down 0.70 percent to $54.19 a piece. Year-over-year, shares are up nearly 247 percent.
But Idol said the company is poised for growth. This includes paying down debt, buying back shares and possibly investing in other brands in the future.
“While I’m not going to declare victory here yet, I think we’re close to that,” Idol said, regarding potential acquisitions. “We think we’re in a place to put these two luxury acquisitions [Choo and Versace] in a place for growth. That gives us great confidence to look for at least one luxury European acquisition in the future. It is going to be a very significant option that’s on the table if we think there’s an option that fits within our portfolio.”