The declines are slowing at Capri Holdings — but there’s still plenty of work to do before the Michael Kors and Jimmy Choo parent gets its stride back.
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At least the company is on a better trajectory and chief executive officer John Idol was able to say that “trends improved sequentially” in the first quarter.
Investors liked what they saw and sent shares of the company up 14.5 percent to $20.84 on Wednesday, leaving the company with a market capitalization of $2.5 billion.
Capri is still a long way off from the $57 per share Tapestry Inc. once agreed to pay for the company, but at least the firm is out of the doldrums it was in before antitrust regulators blocked the deal.
Now the company has a $1.4 billion agreement to sell Versace to Prada, which will let Capri take a big bite out of its $1.7 billion debt load and help fuel a branded turnaround.
“While still early, we are beginning to see signs that our strategies are working,” Idol told analysts on a conference call. “Although the global macroeconomic environment remains dynamic, we are on track to stabilize our business this year while establishing a strong foundation for a return to growth in fiscal ’27.”
And Idol maintained that the company — which took its name from the island of Capri, its three rock formation symbolically tied to the group’s three founder-led brands — would carry on with the two brands.
“Jimmy Choo is not for sale,” Idol said. “We do not have an intent on selling Jimmy Choo.”
But the firm does have plans to ramp Michael Kors sales up to $4 billion in annual revenues, from $3 billion last year, and Jimmy Choo up to $800 million from $605 million “over time.”
First the company has to get back to growth.
Capri’s first-quarter net income rose to $56 million from $5 million a year earlier, with adjusted profits up to $60 million from $18 million. Adjusted earnings per share tallied 50 cents — much better than the 12 cents analysts had penciled in, according to Yahoo Finance.
Revenues for the three months ended June 28 slipped 6 percent to $797 million.
That included results from Michael Kors, where sales were down 5.9 percent, and Jimmy Choo, which was off 6.4 percent. The Versace business was not included as it is being categorized as a discontinued operation.
Although the company hyped its sequential improvement — and Idol got plenty of kudos for it from analysts on the conference call — it was a relatively low bar as fourth-quarter adjusted losses totaled $581 million with a 15.4 percent decline in sales.
But there was some progress there to celebrate.
“In our retail channel, we are starting to see encouraging signs of momentum,” Idol said, pointing to both better traffic trends in the full-price stores, more full-price sell throughs on new styles and a positive turn in the average unit retail prices.
“We view these as early but meaningful indicators that our strategies are gaining traction,” Idol said.
Michael Kors has exited 30 percent of its U.S. department stores over the past year and is on track to close 75 underproductive stores of its own this year.
Idol said the Michael Kors full-price channel would be the first part of the brand to turn around.
“We’re getting close to that right now,” he said. “That’s a very good indicator, as you know. If you’ve got the full-price channel working, that’s an area where you can really kind of solidify the rest of the company.
“We moved very quickly last October, November around the full price,” the CEO said. “It was making sure that we got different product to the floor more quickly. We took a very focused approach to our strategic pricing architecture and that is absolutely paying off.”
The brand is also going to start selling some of its full-price looks in its outlet channel with a program called Icons, which mirrors what other brands have done.
Capri also plans to spend $350 million on store renovations over the next three years and to start to see what Idol said would be “very nice returns on the $100-plus million that we spent over the last couple of years on our data analytics and replatforming our e-commerce areas.”
While sources have said that Capri tried to sell Jimmy Choo this year and that there have been interested parties, including the brand’s cofounder Tamara Mellon, Idol was clear he planned to hold onto the brand.
“We’re excited about the growth opportunity that Jimmy Choo represents for the company,” he said. “When we bought Jimmy Choo many years ago, one of the reasons we bought it is because it has an incredible name and history and heritage with the fashion luxury consumer. It’s highly recognized. And it is in the shoe business, and we thought we would actually learn a lot from them, which we have.
“Over the years, I’m not sure this has been clear, but we’ve actually bought two manufacturing facilities,” Idol said. “So we produce over 50 percent of our own product in-house. We are truly vertical with Jimmy Choo’s two beautiful factories that we have in Italy.…Store fleet is in excellent shape. We spent a lot of money over the years renovating the stores…and so the investments we’ve made, now we can leverage.”
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