Luxury Retailer Capri Holdings Sees Sharp Decline in Quarterly Revenue
The luxury goods sector is facing a major setback, with Capri Holdings, the parent company of Versace, reporting a significant drop in quarterly revenue. The news sent shares plummeting by 6% in extended trading, as the company struggles to navigate a global slowdown in demand for high-end products.
Execution Missteps and Discounting Take a Toll
Capri’s quarterly revenue fell short of expectations, declining 16.4% to $1.08 billion from the previous year. The main contributor to this decline was Michael Kors, which accounted for 68% of total sales in 2024 and saw a 16% drop in revenue. The company was forced to offer more discounts and deal with higher expenses, resulting in a quarterly margin of 64.3%, slightly lower than the previous year’s 64.4%.
Global Slowdown in Luxury Goods Demand
The luxury retail industry is facing a challenging time, with consumers cutting back on expensive non-essentials to limit their expenses. This has led to a decline in demand for high-end brands, including Capri, LVMH, and Estee Lauder. Peer LVMH’s recent results highlighted struggles to lift demand in key markets such as China and Japan.
E-commerce Platform Struggles and Missed Opportunities
Capri has faced difficulties in implementing a new e-commerce platform for Michael Kors, missing opportunities to revitalize the brand and boost profitability for Jimmy Choo and Versace. This has potentially weakened its market position. Telsey Advisory Group analysts noted that the company’s struggles have been exacerbated by execution missteps across brands.
Tapestry Pauses Integration Plans
In a related development, Tapestry, the parent company of Coach, announced that it has paused Capri integration plans. Both companies have jointly appealed a U.S. judge’s decision to block Tapestry’s $8.5 billion deal to acquire Capri. Excluding items, Capri’s profit of 65 cents per share fell short of estimates of 75 cents per share.
Challenging Times Ahead for Luxury Retailers
The luxury goods sector is likely to face continued challenges in the coming months, as consumers remain cautious about spending on high-end products. Capri Holdings will need to address its execution missteps and find ways to revitalize its brands to stay competitive in a rapidly changing market.
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