Discerning shoppers might have noticed that the prices of Jimmy Choo and Michael Kors products have gone up.
During its second-quarter conference call, parent Capri Holdings Ltd. revealed that it has been “quietly” increasing the cost of the high-end fashion brands’ footwear and accessories. The company shared that the hike was taking place “well before” the coronavirus pandemic and is expected to continue over the next three to four quarters.
“The biggest impact from a price increase standpoint will be the Michael Kors house,” chairman and CEO John Idol told analysts on Thursday. “Quite frankly, I think we have underpriced our product over the past, probably, three years, and we’ve seen no resistance… We think that the consumer is remaining completely engaged with us.”
Speaking about Jimmy Choo, he added, “You will also see very significant price increases over the next, probably, 12 months. Again, that brand has been clearly underpriced versus our luxury competitors and one or two of the shoe-only competitors. And again, in the initial price increases we’ve taken, we have not seen any consumer negative reaction to that.”
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For Versace, however, Capri explained that it does not plan any increases. “There’s not going to be any need for that in that business,” Idol said, adding that the company “took some limited [price hikes] on a handful of items. They happen to be high-velocity items, but I think that will stay as you currently see it today.”
Michael Kors’ women’s footwear are priced between roughly $100 and $2,000, depending on the material, style and season of the item. On the other hand, Jimmy Choo’s women’s shoes range from about $395 to $5,500 for its JC X TIMBERLAND/F Swarovski-embellished boots, which are currently sold out. (The company added that the silhouette “sold out immediately.”)
During the three months ended Sept. 26, Capri logged adjusted profits of $137 million, or 90 cents per diluted share, compared with the prior year’s $177 million or $1.16 per diluted share. It still handily bested Wall Street’s expectations of earnings of 4 cents per share. Revenues also decreased 23% to $1.1 billion but were well above analysts’ forecasts of $924.91 million.
Sales at all of the fashion group’s banners plunged as the COVID-19 outbreak continued to impact its business: Versace’s revenues fell 14.5% to $195 million; however, the company shared that the brand remains its “largest growth opportunity” and that it believes sales will rise by more than $1 billion in the next year.
At Michael Kors, revenues sank 27.2% to $793 million, with retail sales advancing “sequentially” and falling in the high teens while e-commerce climbed “strong double digits.” Jimmy Choo recorded a smaller drop of 2.4% to $122 million as its retail performance was “better than expected” and declined in the low double digits, including a triple-digit surge in online sales. With an emphasis on off-duty footwear combined with its luxury offerings, the shoe brand’s revenues are anticipated to grow by $500 million in the coming years.
“Capri Holdings’ second-quarter results significantly exceeded our expectations, with better-than-anticipated performance across all our luxury houses,” Idol added. “The sequential improvement in revenue demonstrates the strength of our brands and resiliency of our teams across the globe. We will continue to execute on our strategic growth initiatives and remain confident in the long-term opportunities for each of our unique global luxury houses.”
The New York-based conglomerate ended the quarter with cash of $238 million and debt of $1.78 billion, along with total liquidity of $1.17 billion. For the year, it expects a revenue decline of approximately 30% — with third-quarter sales predicted to drop double digits and fourth-quarter sales to remain below the prior year despite a more “pronounced improvement in trends.”
“We are extremely pleased with the progress of the recovery thus far, which is well ahead of our internal projections. The luxury industry has proven resilient, and we believe it is poised for years of above average growth,” EVP, CFO and COO Thomas Edwards said. “As we emerge from the pandemic, we are confident that Capri Holdings is well positioned to drive multiple years of strong revenue and earnings growth as well as increased shareholder value.”