Capri Holdings has big plans for Versace.
After purchasing the Italian luxury brand in Sept. 2018 for an enterprise value of 1.83 billion euros, or $2.12 billion, Capri Holdings has spent the last few years revamping the brand to make it a more formidable luxury competitor.
“Versace belongs in the category of some of the most important luxury brands in the world,” Capri Holdings CEO John D. Idol said on the company’s third quarter earnings call on Wednesday. “The brand recognition and the love for this brand is nowhere near the performance. And we feel that we are now able to bring those two things together much more closely.”
Asked by an analyst on Wednesday’s earnings call about the initiatives Capri has implemented in Versace’s growth strategy, Idol was very candid in his explanation on how the company plans to push the Italian luxury brand to at least $2 billion in revenue.
On the call, Idol first admitted that before the pandemic hit, Capri shaved $150 million in volume from Versace’s portfolio and reduced the number of lines the brand sold.
With a more focused line up, Idol said that Versace is “now considered a luxury leather goods house,” in addition to being known for its ready-to-wear categories. “We are going to, in the not-too-distant future, be delivering well over 50% of our volume from those two categories, which is going to help us with margins and also acquiring additional consumers.”
Stores are another focus for the brand’s revamp. “Unfortunately, there was very little investment put into these stores over the last 10 to 15 years,” Idol admitted. “So, we’ve renovated approximately 50% of the fleet. We hope to get the balance of that done in the next 24 months. And we are seeing increased productivity in these stores is quite significant.”
Idol also noted that Versace has the potential to grow its store revenue by 4x as he said the brand’s stores are “still not at the productivity levels of some of our biggest competitors in the world.”
Digital consumer engagement is another priority for the brand. Idol noted that Versace has only been operating with an omnichannel approach in Europe and in North America for the past few months. This approach and the brand’s La Medusa, La Greca and Virtus campaigns, have helped Versace drive a 30% year-over-year increase in its global customer database, Idol said.
“We need to manage Versace’s growth carefully, though,” said Idol. “What we don’t want to do is to have something that explodes and then comes back down off that trend. So, with luxury, you have to invest, you have to pace it and let the consumer really desire it, and not try to push too hard. So that’s something we’re going to be very cognizant of, but we will continue to make significant investments in this brand.”
Versace’s revenue rose 29% to $251 million in the third quarter. Every category performed well, with a special shoutout to footwear. Women’s footwear saw double-digit gains. The Trigreca and La Greca sneaker styles were big wins for the brand. Versace also saw a positive response to the new men’s Greca Labyrinth trainer featuring a chunky Greca pattern sole.
Looking ahead, Idol teased the label’s upcoming women’s fall 2022 collection. “I think you’re going to be quite impressed by what Donatella does in the coming February show,” Idol said. “I’ll leave you for the surprise when you see it, but there’s some really powerful things coming around accessories.”