Capri Holdings, the parent company of luxury brand Michael Kors, is experiencing a slowdown in sales in the United States, leading to a downward revision in its annual sales forecast. As a result of this news, the company’s shares dropped nearly 9% in early trading.
The decline in demand for high-end handbags and shoes in the US can be attributed to consumers becoming more cautious about indulging in luxury purchases. The increasing cost of living has made individuals more hesitant to splurge on luxury items. This trend is not unique to Michael Kors, as other luxury brands such as LVMH and Gucci owner Kering are also facing lower sales.
However, there is a glimmer of hope in the Asian market, particularly in China. Shoppers in China have shown a quick rebound in their demand for luxury goods after the lifting of COVID-19 restrictions. This surge in demand has had a positive impact on Tapestry Inc, the maker of Coach handbags, as they have raised their annual profit outlook. Unfortunately for Capri Holdings, the weakening demand in the US is expected to offset any positive effects from the Asian market.
Capri CEO John Idol anticipates that the company’s American business will remain sluggish throughout the summer. Consequently, the company has revised its annual revenue forecast to $5.7 billion, down from the previous outlook of approximately $5.8 billion. Capri also fell short of analysts’ expectations for first-quarter sales and profit, primarily due to a significant decline in its wholesale business as US department stores decrease their orders.
Despite these challenges, Capri Holdings recorded higher revenue than estimated for the fourth quarter, reaching $1.34 billion. Moreover, adjusted earnings per share were 97 cents, surpassing analysts’ expectations of 94 cents per share.
In conclusion, Capri Holdings, the parent company of Michael Kors, is facing a decline in demand for its luxury goods in the United States. While there is some growth in the Asian market, it is not expected to fully compensate for the downturn in the US market. As a result, Capri Holdings has revised its annual sales forecast and has cautioned about a decline in its wholesale business. Nonetheless, the company’s fourth-quarter results exceeded estimates, providing a ray of positivity amidst the challenges.
Useful links:
1. CNBC: Michael Kors parent Capri Holdings’ earnings in Q4 2021
2. Business of Fashion: Michael Kors Owner Capri Lowers Annual Sales Forecast
