A Look at Capri Holdings’ Strategic Missteps with Versace and Michael Kors

Capri Holdings has reported a decline in quarterly revenue of nearly 12%, accompanied by a $600 million write-down in the values of Versace and Jimmy Choo, indicating significant challenges within its brand portfolio.

The ambitious plans devised by Capri to revive its brands have not only failed but appear to have backfired. The company has taken a substantial $600 million write-down on Versace and Jimmy Choo, signaling deep-seated issues within its operations. These brands, once symbols of luxury and desirability, are now grappling with the consequences of ill-advised strategic choices.

A core issue was Capri’s attempt to elevate Versace by focusing on sophisticated craftsmanship and higher-priced products, aligning with the quiet-luxury trend. However, this shift alienated a broader customer base, as it removed many of the statement items that resonated with more aspirational consumers. The result was a significant 15% drop in Versace’s revenue.

On the other hand, Michael Kors, in its bid to capture a younger demographic, overloaded on trendy fashion pieces, alienating its loyal customers. Over two years, substantial price hikes were introduced, which, as consumer sentiment shifted towards more cautious spending, led to increased discounting. Recognizing this misstep, Kors plans to reduce clothing prices by 30% to 40% in the upcoming season, hoping to recapture its core market.

John Idol, CEO of Capri, has emphasized the company’s focus on repositioning these brands rather than selling them, although he noted that he remains open to potential offers from interested parties.

Capri Holdings faces a critical period of reassessment and adjustment as it aims to strengthen its brand appeal and financial performance in the competitive luxury market.