Feeling bullish after a strong quarter, Capri Holdings chief John Idol is sending a clear message: Prices at Michael Kors will continue to go higher as promotions wane.
In Europe and Asia, where the brand derives a high percentage of sales, the discounting conversation isn’t relevant, the Capri chairman and CEO said in conference call today. In North America, which has traditionally been a more promotional environment, the company shifted away from discounting for one major reason.
“We’ve shown that we make more on lower sales than we did on having higher sales and trying to chase our own selves or other competitors. So we’ve made the decision, prices are going higher, we’re going to have less promotional activities and we’re going to let the consumer respond to that,” Idol said.
Without naming specific competitors, Idol said he’s seeing other people start to promote more aggressively than Kors. “And that’s OK. If they do, that’s going to be their strategy, and we wish them well, but we’re not going to start to go down that path.”
Overall, Kors is sitting on low inventory levels, due to a supply chain crunch that’s causing delays of between 45 and 60 days.
Idol expects that to shift over the next two quarters, however, as the brand brings in more core products earlier to alleviate delays.
“We might hold a little more inventory, in particular, on basic product where we’re just running reorder businesses, and let that flow through as this supply chain issue kind of works itself out over what we think will be a 6 to 12-month period of time [starting in January]. We think it’s going to take most of next year for that to work itself out.”
Idol — who next year will hand over the reins to Josh Schulman as part of a planned succession process — was also upbeat about the brand’s footwear business, where women’s shoe sales at retail increased in the double digits during the period.
More broadly, Capri delivered strong quarterly results, and the company raised its forecast. Investors like what they see: The stock is up nearly 15% as of 2:20 p.m.
Capri’s profits rose 64 percent to $200 million, or $1.30 a diluted share, from $122 million, or 81 cents, a year earlier. Adjusted earnings per share came in at $1.53, easily beating the 95 cents Wall Street analysts forecast.