New Michael Kors to increase focus on Asia
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With the completion of its acquisition of Versace, global fashion group Michael Kors Holding has successfully transitioned into its new identity as Capri Holdings Limited. The group, which now owns Michael Kors, Jimmy Choo and Versace, hopes to leverage its brands to grow group revenue to US$8 billion, while increasing its exposure to the Asia pacific region from 11 per cent to 19 per cent.
The group also notes an effort to reduce its exposure to the American market, from 66 per cent to 57 per cent, in the long term.
“We have now created one of the leading global fashion luxury groups in the world,” Capri chairman John D. Idol said.
However, considering the past performance of these brands, one cannot be certain whether this merged entity can turn them around says IBISWorld senior industry analyst Kim Do, though “Capri Holdings seem confident in their ability to do so.”
“While many are concerned about the company diffusing its newly acquired brands, similar to that of its own, this is unlikely as, similar to Jimmy Choo’s agreement with Kors Holdings, Donatella Versace will continue to remain the creative director [of] her namesake brand, leading the brand’s creative vision,” Do said.
“However, while it is likely that Versace will be pushed into new avenues of revenue (such as a stronger focus on Asian markets) it will likely not include mass-retailers – which is how Michael Kors expanded previously.”
According to Do, IBISWorld expects Capri to hold off on further acquisitions for the time being, and will most likely focus on growing the three brands it now hold in its portfolio.
In November 2018, the group saw total group revenue decline 32 per cent to $189.76 million (US$137.6 million), from $279.81 million (US$202.9 million) the year prior, which GlobalData Retail managing director Neil Saunders called “disappointing”.
“Although overall revenue growth looks robust, it continues to be flattered by the acquisition of Jimmy Choo, which has yet to annualise out,” Saunders said.
“We have now created one of the leading global fashion luxury groups in the world,”
“In short, after slowly climbing the steep hill of recovery, Michael Kors now appears to be rolling back down in reverse.”
Saunders also said the acquisition of Versace could prove to be a distraction that limits the group’s abilities to fix the core problems within it’s main brand.
In November 2018, the group saw total group revenue decline 32 per cent to US$137.6 million, from US$202.9 million the year prior, which GlobalData Retail MD Neil Saunders called “disappointing”.
“Given Michael Kors’ relative lack of success with its own label, we do not see the group being able to [easily] undertake the retooling required to generate superior results.”
Questions & Answers
Q.What is Capri Holdings' financial target for group revenue?
What is Capri Holdings' financial target for group revenue?
Capri Holdings aims to increase its group revenue to US$8 billion. This goal is to be achieved by using its three brands: Michael Kors, Jimmy Choo, and Versace, following the recent acquisition.
Q.How will Capri Holdings change its market focus geographically?
How will Capri Holdings change its market focus geographically?
The group plans to significantly increase its exposure to the Asia Pacific region, growing it from 11% to 19%. Concurrently, it intends to reduce its reliance on the American market from 66% to 57% in the long term.
Q.What concerns have analysts raised about Capri Holdings' strategy?
What concerns have analysts raised about Capri Holdings' strategy?
Analysts are concerned that the merged entity might struggle to turn around the acquired brands, especially given Michael Kors' past performance. There are also worries that the Versace acquisition could distract from fixing core issues.
Q.Did Capri Holdings' revenue increase or decrease in November 2018?
Did Capri Holdings' revenue increase or decrease in November 2018?
In November 2018, the group's total revenue declined by 32% to US$137.6 million, down from US$202.9 million the previous year. This performance was described as 'disappointing' by Neil Saunders.
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