Capri Misses Estimates as Hong Kong Protests Hit Versace and Jimmy Choo

Capri Holdings Ltd. is the latest luxury fashion player to bemoan the impact of ongoing protests in Hong Kong.

The London-based group — parent to Michael Kors, Versace and Jimmy Choo — reported today disappointing second-quarter earnings, which Chairman and CEO John D. Idol attributed to “greater-than-anticipated challenges related to the situation in Hong Kong.”

For the period ended Sept. 28, Capri noted adjusted earnings of $1.16 per share on profits that dipped 7.8% to $177 million, missing Wall Street’s forecast of $1.24 per share earnings. Sales, however, met consensus bets of $1.44 billion — a 15.1% gain from the prior year quarter.

Revenues at both Versace and Jimmy Choo were negatively affected by weaker performances in Hong Kong, which for months has been a battlefield between police and demonstrators, beginning with a dispute over a proposed extradition bill. The clashes have taken a toll on tourism as well as retail sales, the latter posting its worst year-over-year decline on record in August with a 23% percent drop. Analysts estimate that Hong Kong accounts for between 5% and 10% of global luxury goods sales.

According to the firm, Versace’s revenues were flat at $228 million, with double-digit growth in same-store sales in the Americas, Europe, Middle East and Africa offset by declines in Asia. The Italian fashion house also took a hit for selling an “incorrectly labeled product,” which was a T-shirt that characterized the Chinese territories of Hong Kong and Macau as separate countries.

Jimmy Choo’s sales rose 7.8% to $125 million, but its comps sank in the mid-single digits. Performance in Japan was also weak, a year after Jimmy Choo celebrated a “highly successful” 10th anniversary campaign. Excluding Hong Kong and Japan, the firm added, same-store sales would have been flat.

Revenues at Michael Kors also decreased 4.2% to $1.09 billion, while same-store sales climbed in the low single digits.

Idol remained positive in his statement: “We were pleased to deliver a double-digit increase in revenue, driven by the addition of Versace and growth from Jimmy Choo. Michael Kors revenue was in line with our expectations, and we are extremely pleased to report that the brand returned to positive comparable store sales during the quarter, led by our successful efforts across product innovation, brand engagement and customer experience.”

Capri reiterated its guidance for full-year revenues of $5.8 billion and adjusted earnings per share of $4.95. For the third quarter, it expects Versace to log revenues of $180 million, Jimmy Choo to bring in $165 million and Michael Kors to record sales slightly below $1.2 billion.

“From a longer-term perspective, we are encouraged with the progress we are making developing our global fashion luxury group,” Idol added. “The integration of Versace is going smoothly, and Jimmy Choo continues to advance its strategic initiatives. Additionally, the Michael Kors brand repositioning efforts are resonating with customers.”

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