Capri Holdings, which just last month sealed the deal on its Versace merger, on Wednesday reported that third quarter total revenue was flat with last year at $1.44 billion.
By brand: Michael Kors retail revenue fell 1% to $838 million as comparable store sales fell 2.4% (1% in constant currency), according to a company press release. A year after acquisition, Jimmy Choo revenue rose mid-single digits to $161.6 million as inventory as of Dec. 29 swelled 35.3% to $158.5 million.
Net income in the quarter fell to $199.6 million from $219.4 million in the year-ago quarter. Adjusted gross profit fell to $874.1 million from $885.6 million in the year-ago quarter, and adjusted gross margin declined to 60.8% from 61.5% last year. Adjusted income from operations fell to $316.5 million from $345.7 million and operating margin declined to 22% from 24%.
With recovery at Michael Kors emerging as quite a slog, plus the looming work of integrating and revamping its newly arrived Versace label, Capri has a lot on its plate.
"The turnaround at [Michael Kors] is slow, the product is inconsistent, and we have not seen much improvement in stores," Jane Hali & Associates analysts said in comments emailed to Retail Dive, noting heavy promotions of the brand during the holidays that lasted into January. "We continue to see the same silhouettes season after season. The company updates through detailing and colorways."
Jimmy Choo, by contrast, is keeping its styles fresh and is successfully wooing influencers on social media, Jane Hali said. "The Jimmy Choo product continues to be on trend and resonates with consumers across the globe," they wrote. "The brand launched a boot (the Voyager) which features heated soles that the user can control via an app."
But even Jimmy Choo's revenue results were weaker than the company had expected, according to William Blair analyst Dylan Carden, who in a client note emailed to Retail Dive said that Kors' weakness was in both retail and wholesale, and both at home and in Europe. "Kors comp remained negative through a year of previously expected recovery and ahead of a ramp-up in store closures, while we continue to believe domestic and international wholesale exposure is still oversized for the business," he wrote.
Capri expects Versace to bring in $2 billion this year, (and, long term, $8 billion) and Jane Hali noted its contention that the goal would be achieved by opening stores and expanding accessories and footwear. But "expectations around future contribution from Versace have to be tempered for now," Carden said, pointing to the drag that Kors is having on overall operations. "Consider the company has not lapped its first acquisition and sales and earnings are effectively flat. While initial Choo numbers appear to be coming in toward the softer end of the range, much of the downside is owing to continued weakness at the Kors brand level."