The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
Michael Kors parent Capri Holdings Ltd on Wednesday cut its annual sales forecast as demand for its handbags and shoes weakens in the United States, sending its shares down nearly 9 percent in early trading.
Demand for high-end goods has softened in the US as shoppers pause luxury indulgence in the face of rising cost of living, also affecting sales of other luxury brands such as LVMH and Gucci owner Kering.
Revenue from the company’s biggest brand, Michael Kors, fell nearly 11 percent to $910 million, while Asia sales rose marginally during the fourth quarter following a rebound in China demand.
Chinese shoppers, unshackled from Covid-19 curbs, have returned to splurging on bags and apparel, driving peer Coach handbag maker Tapestry Inc to raise its annual profit outlook earlier this month despite a slowdown in US luxury purchases.
ADVERTISEMENT
CFRA Research analyst Zachary Warring said sagging US demand will likely offset easing supply chain pressure as well as tailwinds in Asia for Capri.
“We think that [Americas] business will remain soft probably through the majority of the summertime,” Capri chief executive officer John Idol said.
The company lowered its annual revenue outlook to $5.7 billion from its earlier outlook of about $5.8 billion.
Its forecast for first-quarter sales and profit also fell short of analysts’ expectations as the company warned of a significant decline in its wholesale business as US department stores cut back on orders.
The company’s revenue of $1.34 billion beat estimates, even as sales in the Americas segment declined across Capri’s three brands during the reported quarter.
Adjusted earnings came in at 97 cents per share, higher than 94 cents that analysts had expected.
By Savyata Mishra; Editor Vinay Dwivedi
Learn more:
ADVERTISEMENT
Capri Cuts Forecasts as Demand Slows, Shares Plunge 20%
Luxury companies weathered inflation better than other industries as affluent shoppers dipped into pandemic savings, but persistently increasing prices have now prompted high-end spenders to stem their splurging on designer labels.
The group’s flagship Prada brand grew more slowly but remained resilient in the face of a sector-wide slowdown, with retail sales up 7 percent.
The guidance was issued as the French group released first-quarter sales that confirmed forecasts for a slowdown. Weak demand in China and poor performance at flagship Gucci are weighing on the group.
Consumers face less, not more, choice if handbag brands can't scale up to compete with LVMH, argues Andrea Felsted.
As the French luxury group attempts to get back on track, investors, former insiders and industry observers say the group needs a far more drastic overhaul than it has planned, reports Bloomberg.