Capri Holdings Ltd recently announced that its current-quarter profit is expected to fall below estimates, as the company shifts its focus towards investing heavily in the wake of its acquisition of luxury brand Versace. This decision to invest in expanding the Versace business will also contribute to a reduction in sales targets for its Michael Kors segment, leading to a 7% drop in the company’s shares.
The strategy moving forward involves expanding the Versace brand by opening new stores and enhancing its online presence to drive revenue to $2 billion annually. This ambitious plan includes increasing the number of Versace stores from around 200 to 300 while leveraging various marketing channels to promote the brand.
CEO John Idol emphasized that the upcoming fiscal year will be dedicated to investing in the growth of the company, although this significant spending will likely impact profits. Capri Holdings Ltd’s forecast for the first quarter ending in June predicts earnings per share in the range of $0.85 to $0.90, with a 15-cent impact from the Versace acquisition, falling short of analysts’ average expectation of $1.23 per share.
Additionally, the company reported a decrease in wholesale and licensing revenue for its Michael Kors business, attributing the shift to changing consumer preferences towards online shopping. As a result, Capri revised its full-year revenue forecast for Michael Kors down to $4.45 billion from the initial target of $4.55 billion.
Despite the weaker forecast, Capri Holdings Ltd exceeded expectations with earnings of $0.63 per share for the fourth quarter, accompanied by a 13.9% increase in total revenue to $1.34 billion. Moving forward, the company’s strategic decisions regarding the expansion of its luxury brands will be closely watched by investors and analysts, as they navigate through these changes and their impact on profits.
Links:
1. Capri Holdings Invest in Growing Versace Brand
2. Shares in Coach Owner Capri Slide on Weak Forecast
