Michael Kors Owner Slides After Cutting Full-Year Sales Forecast

(Bloomberg) -- Capri Holdings Ltd., the company behind Michael Kors and other luxury brands, tumbled the most in almost seven months after trimming its sales projection for the current year amid foreign currency weakness and lower revenue from wholesale.

• Capri sees revenue of $6 billion for the current fiscal year, the company said in its quarterly earnings report. That’s down from a previous outlook of $6.1 billion, with same-store sales for the Michael Kors brand seen as flat. That measure, a key gauge of retail success, is expected to grow for the smaller Versace and Jimmy Choo brands.

Key Insights

• The company formerly known as Michael Kors is reinventing itself as a house of luxury brands, after acquiring fashion labels Versace for $2.2 billion and Jimmy Choo for $1.2 billion, both in the past two years. Chief Executive Officer John Idol said this is an “investment year” for the company.
• Michael Kors has been cleaning up its U.S. operations after years of heavy discounting took a toll on the business. Executives have worked to clear inventory and restore the brand’s luster, but comparable sales slid 1% in the quarter on a constant currency basis, a bigger drop than analysts predicted. The division’s revenue also declined.
• Management aims to more than double Versace’s sales to $2 billion annually and will increase the brand’s store count to 300 worldwide. Idol said expected growth at Versace and Jimmy Choo will drive much of the company’s goal of increasing its annual revenue to a range of $6 to $8 billion -- up from about $5.2 billion in its latest fiscal year.

Market Reaction

• Shares of Capri dropped as much as 8.6% in New York, the biggest intraday decline since early November. They had gained 2.6% this year through Tuesday’s close, compared with the 12% advance in the S&P 500 Index.

Get More

For more on the results, click here.
For the company statement, click here.

--With assistance from Timothy Annett.

To contact the reporter on this story: Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson, Jonathan Roeder

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