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  • Capri prospects ‘ugly’ as Michael Kors, Jimmy Choo underperform

    Capri prospects ‘ugly’ as Michael Kors, Jimmy Choo underperform

    US luxury group Capri has ended its fiscal year on an unsurprisingly gloomy note, largely due to the negative impact of the coronavirus.

    While the slip of 11.3 percent in total revenue does not look too bad compared to some other retailers, this is mostly because Capri’s quarter ends on March 28 and, therefore, does not include the massive disruption of April and May when the US and many other countries went into lockdown.

    These numbers are something of a prelude to a significantly uglier set of first-quarter results – indeed, Capri expects revenue for that period to be down by around 70 percent.

    On a brand basis, Jimmy Choo posted the worst performance with revenue down by 23 percent. On the bottom line, the division made an operating loss of US$23 million. While performance has been improving over the past couple of quarters, mainly thanks to enhanced collections of active footwear and accessories, the disruption of the pandemic badly affected the sale of more formal and fashionable footwear styles as consumers started to work from home and restricted socializing.

    Unfortunately, this is a trend that will continue for at least the next two quarters and it is hard to see Jimmy Choo regaining much momentum. That said, the year-old decision to transform Jimmy Choo into a more balanced luxury brand that sells high-end footwear for leisure, some fashionable sneakers for active occasions, and a wider range of accessories, now seems extremely prescient.

    This will not completely offset the challenges in other parts of the market but does give Jimmy Choo a lifeline that will stop it from completely sinking.

    Versace bucked the general trend with a 55.5-per-cent increase in sales. Some of this is due to softer comparatives from the prior year, when Capri had only just taken control of the business.

    However, the company also deserves credit for the various improvements it has made to the brand, particularly in terms of collections. A renewed focus on accessories, driven by a new Virtus range supported by strong marketing, has helped to boost sales. As GlobalData noted prior to the acquisition, the Versace brand was, admittedly by design, rather gaudy and off-putting for many consumers. Working with Donatella, Capri has begun to change this by creating a more understated, but still flamboyant, selection which has successfully improved both customer engagement and brought new shoppers to the brand.

    While there is no doubt that Versace will be disrupted by the pandemic in the near term, the brand appears to have a renewed sense of purpose which will help it to deliver next year and beyond. While Versace thrived, the Michael Kors division remains in distress. Revenue was down by 18.4 percent off the back of a very modest decline in the prior year. This caps a year when sales have fallen in every single quarter.

    Although some parts of the assortment, such as sneakers and accessories, have performed well, the rest of the business is lackluster. Michael Kors still suffers from an identity crisis: the brand spans far too many different styles, products, and price tiers. As a result, it lacks integrity and is unable to build a business or aesthetic around a clear, core customer. In a highly competitive marketplace of luxury brands, this position simply isn’t good enough to drive sustainable growth.

    Unfortunately, these trends are not new and have been in play for at least two years. Now that Versace and Jimmy Choo appear to have more sound underlying strategies our hope is that management will turn its attention to untangling the Gordian knot of Michael Kors’ brand image.

    Overall, like other retailers, Capri is in for a rough ride over the next six months. It has the liquidity to survive the storm. But it must work on making its core brand seaworthy for the calmer waters ahead.

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  • New Michael Kors to increase focus on Asia

    New Michael Kors to increase focus on Asia

    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.

    “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.”

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  • Jimmy Choo takes trademark action against Chu

    Jimmy Choo takes trademark action against Chu

    Jimmy Choo is taking a preemptive strike at some potential competition. Xianjie Zhu, a 19-year-old from Guangdong Province in China, goes by Jerry Chu at Central Saint Martins, where he’s a fashion student specialising in menswear.

    Last year, at the recommendation of his father, he applied to register his English name in Beijing in case he decided to use it to start a clothing line in the future. With two years left of school, Chu had not yet given starting a line any serious thought, he said.

    Last week, the footwear and accessories brand Jimmy Choo filed a request to invalidate Chu’s trademark, arguing that the similarities between the names Jimmy Choo and Jerry Chu would cause confusion in the market.

    The company cited previous trademarks it has successfully invalidated, for trademarks including Jenny Choo and Ray Choo.

    Susan Scafidi, founder and director of the Fashion Law Institute at Fordham University’s School of Law, said these disputes are common — so much so that she always urges young designers not to name their businesses after themselves.

    “Designers with common names in particular often have to engage in protracted legal disputes with companies who already own the same or similar names,” she said.

    But fashion consumers today are accustomed to distinguishing between namesake labels with similar names, such as Alexander Wang and Vera Wang, said Scafidi, and there is hope for independent designers.

    Last month, Thaddeus O’Neil, the surf-inspired menswear label, reached a settlement with surfwear brand O’Neill after more than four years of legal disputes between the two companies.

    Scafidi explained that a significant difference between those disputes and Jerry Chu’s situation is that in the US, trademarks must be used in commerce in order to be valid. Having an active business can also help demonstrate that a brand with a similar name is not producing similar products or “trademark squatting” in order to get a payout from a larger brand. Brands with global name recognition like Jimmy Choo are especially vigilant about trademark protection.

    “Jimmy Choo may well have assumed that the Jerry Chu registration was just another attempt to trade on the established Jimmy Choo name, since soundalike registrations are a particular problem in countries like China, whose primary writing system uses characters rather than letters,” said Scafidi.

    Chu and his lawyers will wait to see what the trademark committee decides, he said, hoping that the situation can be resolved quickly.

    The student posted the legal papers on Instagram this week, catching the attention of fashion’s social media watch dogs, Diet Prada, who echoed his frustration and spread the word.

    “I’m surprised so many people would care about me, an independent designer, a student,” he said.

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  • Michael Kors Holdings Limited Announces Strong First Quarter

    Michael Kors Holdings Limited Announces Strong First Quarter

    Luxury fashion group Michael Kors delivered better than anticipated revenue, operating margin, and earnings per share growth in its Q1 FY19 results, with total revenue increasing 26.3 per cent to US$1.2 billion.

    Total operating margin reached 17.9 per cent, up from last years 15.7 per cent for the period, while earnings per diluted share were US$1.22 on a reported basis, an increase of 52.5 per cent compared to the prior year.

    The Jimmy Choo brand exceeded expectations due to strong performance in footwear.

    “Our fashion leadership remains strong, which drove consumers to respond favourably to both new fashion introductions and core products,” said chairman and CEO John D. Idol.

    “Our global fashion luxury group continues to see the benefits of our long term growth strategy which is driven by both the Michael Kors and Jimmy Choo brands. Looking ahead we remain optimistic about our business for the remainder of fiscal 2019 and beyond.”

    These strong results must be seen in the context of lackluster results in the prior year, according to analyst, which saw revenues drop by a “disastrous” 8.2 per cent in the US.

    “Admittedly, the 26 per cent uplift in total revenue continues to be flattered by the addition of Jimmy Choo, but even when this is excluded, revenue still rose by a solid 8.1 per cent,” said Saunders.

    “One of the vehicles helping create a better impression on consumers are stores. Here, Michael Kors has invested a significant amount in renovating older outlets to create a more luxurious experience.

    “Early results are encouraging with a much better revenue performance coming from the refurbished shops than the rest of the chain.”

    Due to the positive result, the company raised full year adjusted earnings per share guidance from US$4.90 to US$5, and expects full year total revenue to reach US$5.125 billion.

    Michael Kors also revealed it expects second quarter to bring total revenue of approximately US$1.26 billion, with retail revenue to grow by low-single digits.

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  • Michael Kors sales up 11%, driven by Jimmy Choo revenues

    Michael Kors sales up 11%, driven by Jimmy Choo revenues

    Michael Kors Holdings recorded $1.18bn in the crucial fourth quarter, close to an 11% gain on last year, a revenue result driven most by sales brought in from Jimmy Choo, the luxury shoe business it acquired last summer for $1.2bn.

    Like-for-like sales during the three months to end of March were up 2.3%, besting expectations for a 1% decline, marking the first time in two years that Michael Kors reported a comp sales rise. For the same period last year, comp sales were down 14.1%.

    By brand, Michael Kors sales hit $1.07bn, the rise in sales at its own stores helped offset the decline in wholesale

    Less discounting also boosted operating margins and helped the company swing back into the black. Net income was $44.1m, or 29 cents a share during the quarter, compared to a net loss of $26.8m or 17 cents per share last year.

    For the year, the company reported profit of $591.9 million, or $3.82 per share. Revenue was reported as $4.72 billion.

    In light of sluggish in-store retail sales, Kors has been trying to overhaul its business as shoppers shift many of their purchases online, where there’s an abundance of luxury goods at lower prices.

    The company said it also closed some locations during the quarter, cutting some costs.

    Looking forward, the American company reiterated that it remained on the lookout for further acquisitions following the Jimmy Choo deal.

    “We will continue to explore acquisitions to complement our existing luxury portfolio,” said chairman and chief executive John Idol.

    For the current quarter ending in July, Michael Kors said it expects revenue in the range of $1.14 billion

    The company expects full-year earnings to be $4.65 to $4.75 per share, with revenue expected to be $5.1 billion and flat same-store sales.

  • Pret A Manger sold to Krispy Kreme owner for £1.5bn

    Pret A Manger sold to Krispy Kreme owner for £1.5bn

    Pret A Manger’s global business, including Hong Kong and Singapore, has been sold to global investment firm JAB.

    Flush with cash from the sale of Jimmy Choo and a controlling interest in Bally, JAB is refocusing its core business investments on consumer goods and cafes. The company, majority owned by Germany’s secretive Reimann family – has controlling stakes in US coffee brand Keurig Green Mountain, European coffee supplier Jacobs Douwe Egberts, cafe chains Panera Bread, Peet’s Coffee & Tea, Caribou Coffee Company, US bagel chain Einstein Noah Restaurant Group, Krispy Kreme Doughnuts, and Espresso House, Scandinavia’s largest branded coffee shop chain. It also owns shares in makeup giant Coty and consumer goods company Reckitt Benckiser.

    UK-headquartered Pret A Manger, which has 530 stores globally, including 26 in Hong Kong, one in Singapore and two in Mainland China, serves 300,000 customers daily with global revenues of £879 million (US$1.166 billion).

    JAB will pay nearly $2 billion for the business (including taking over debt) to private equity investor Bridgepoint and an assortment of minority shareholders. According to BBC News, all 12,000 staff globally will receive a bonus of about US$1200. Bridgepoint bought the business in 2008, including a 33 per cent stake then held by fast-food operator McDonald’s Corporation, paying €500 million for the business, or US$584 million at today’s exchange rate.

    Pret A Manger CEO Clive Schlee described the sale announcement as “a day of celebration at Pret”.

    “This agreement recognises the hard work of all our amazing teams around the world. Bridgepoint has been a wonderful owner of the business for more than a decade. All of us at Pret believe JAB will be excellent long-term strategic owners.”

    He said JAB supported Pret’s growth plans, suggesting further expansion in Asia is on the cards as the company refines its offers in Singapore and China.

    “I am really looking forward to this next chapter of Pret’s story.”

    The deal follows a ninth successive year of like-for-like sales growth for Pret A Manger.

    “The brand continues to thrive around the world thanks to our simple recipe of freshly prepared food, served by genuinely engaged teams,” said Schlee.

    JAB partner and CEO Olivier Goudet said his company plans to continue Pret’s “extraordinary growth story”.

    “Management’s proven track record and commitment to customer service, investment in innovation and approach to freshly prepared food position Pret well as it capitalises on evolving consumer taste and lifestyle preferences. We look forward to working with Clive Schlee and his management team, while promoting the Pret brand and supporting Pret’s impressive culture for the next phase in the company’s growth with JAB.”

    Last year, Philippines fast-food operator Jollibee was linked to a bid for Pret A Manger at a value exceeding $1 billion and Bridgepoint was also reportedly considering an IPO for the business.

    It would appear from the published reactions of Pret A Manger management private ownership is a more comfortable fit with the business.

  • Asia safes Michael Kors performance

    Asia safes Michael Kors performance

    Asia proved the strongest growth market for premium apparel and accessories retailer Michael Kors last year, offsetting ongoing weakness in its largest market, the Americas.

    Asian sales increased 17.5 per cent to US$137.7 million in the fourth quarter and were up 33.7 per cent to $469 million for the year.

    Michael Kors sales and profit numbers released overnight included a better than expected fourth quarter, but flat forecasts for the year ahead disappointed analysts.

    Net income for the three months ended March 31 was $44.5 million, a significant improvement over a $26.8 million loss during the same period last year.

    Fourth-quarter comparable Michael Kors sales were up 2.3 per cent on strength in accessories, footwear and men’s categories, but fell 1.7 per cent on a currency-corrected basis.

    Michael Kors has been investing heavily in transitioning its business model following the acquisition of Jimmy Choo last year, with chairman and CEO John D Idol saying a solid foundation had been created.

    “We created a global luxury group with the acquisition of Jimmy Choo and completed the first year of our Runway 2020 strategic plan for the Michael Kors brand, ending the year significantly ahead of our expectations,” he said.

    “Looking to fiscal 2019, we have a number of initiatives planned to drive growth in both of our luxury brands.

    The company expects building momentum to deliver first quarter revenue of around $1.13 billion, with a $140-$145 million contribution from Jimmy Choo’s 182 stores.

    Neil Saunders said the addition of Jimmy Choo had masked weakness in Michael Kors sales figures for last year.

    “While the headline growth number from Michael Kors looks strong … it is flattered by the addition of Jimmy Choo sales; when these are stripped out, the growth plummets to a lacklustre 0.6 per cent,” Saunders said.

    “This anemic underlying growth rate comes off the back of a dire performance last year when revenues plunged by 11.2 per cent. Taking account of all these things, the fashion brand is ending its fiscal year with soft growth.”

    Store renovations, expansion into new luxury concepts, a renewed focus on e-commerce and the launch of a new loyalty program have emerged as key pillars of the company’s 2020 strategic plan.

    In comparison, Americas sales declined by 2.5 per cent to $342.8 million in the fourth quarter and by two per cent to $1.67 billion for the year.

    “Perhaps the most damning figure is the Americas retail sales number,” Saunders said.

    “A particularly worrying outcome given the 18 per cent decline posted in the prior year. In our view, this number clearly indicates that Michael Kors is not back to full strength and still has a lot of work to do on its proposition.”

    Encouragingly, retail growth and the addition of Jimmy Choo bolstered margins, resulting in a 14.5 per cent increase in gross profit.

    Jimmy Choo sales were $107.9 million worldwide in the fourth quarter and $222.6 million for the full year, with Europe and the Middle East driving turnover.

    There were 1011 stores in Michael Kors business as at March 31, including 829 Michael Kors stores.

  • Jimmy Choo starts selling make-up

    Jimmy Choo starts selling make-up

    After the launch of its fragrance Fever, fashion label Jimmy Choo plans to broaden its offering by developing a make-up range.

    CEO Pierre Denis says that while the brand may be known for its shoes, it also offers bags, small leather goods, sunglasses and fragrances.

    “Jimmy Choo is more than a shoe brand, it is really an accessory brand,” he says. “We are particularly proud we have fragrances, and to be frank, not many shoe brands are successful with perfumes.”

    Choo has been working with French manufacturer Interparfums for eight years, launching three fragrances.

    Declining to reveal details, Denis says the fragrance collection will be “glamorous”, in keeping with the brand’s image. Fever will become part of its portfolio from August 13.

  • Interparfums and Bolloré Logistics Extend their Partnership

    Interparfums and Bolloré Logistics Extend their Partnership

    Interparfums and Bolloré Logistics announce the extension of their partnership for a period of three years including 2018, 2019, and 2020.

    Interparfums is a French company that develops perfumes and cosmetics lines on the basis of global exclusive licensing agreements with luxury, fashion or accessories brands that include Montblanc, Jimmy Choo, Coach, Boucheron or Van Cleef & Arpels. They own Lanvin fragrances and Maison Rochas (fashion and perfumes). The company monitors and takes complete care of the perfume life cycle, from its creation to its distribution in France and internationally.

    Bolloré Logistics has accompanied the development of Interparfums’ logistics activities since 1994.

    The logistics partnership started in a 200 m² warehouse located in Petit Quevilly, Upper Normandy, and then was transferred to a dedicated warehouse of 9,000 m² in Grand Couronne in 2000, after which was expanded in 2003 to reach a surface area of 12,000 m².

    Given its strong growth, Interparfums continued their expansion with the construction of an additional 9,000 m2 building to reach a total surface area of 21,000 m2 in 2006. In 2011, activity at Grand Couronne was transferred to Criquebeuf sur seine in a 30 000 m2 building rented by Interparfums.

    To date, a construction permit for the creation of an additional 6,000 m2 cell of was issued with a delivery planned for the second quarter of 2018 therefore increasing the total surface area to 36,000 m2.

    The Bolloré Logistics branch in Grand Couronne provides upstream transport from the packers located in France in the Normandy, Centre Val de Loire and Hauts de France regions, as well as logistics services. It takes care of unloading, reception of products, storage and stock management, ordering, order preparation for France and global destinations by sea and air routes, transport planning, documentation management and returns, thanks to interfacing systems, Electronic Data Interchange (EDI) with Interparfums. Bolloré Logistics teams also provide monthly and annual inventories.

    Olivier Boccara, Global Sales Director at Bolloré Logistics, commented: “Interparfums is a historical customer who trusts us and we are proud to support during their expansion by providing quality logistical services that are recognized throughout this long partnership.”

    Philippe Santi, Deputy Managing Director of Interparfums added: “Bolloré Logistics has been a key partner in our development for many years. Their expertise in the perfumes and cosmetics sector, the quality of their processes and the professionalism of their local teams are for us key factors of success and allow us to offer a powerful service to all our customers worldwide.”

  • Off-White and Jimmy Choo together for Galeries Lafayette

    Off-White and Jimmy Choo together for Galeries Lafayette

    Announced in September 2017 during the spring/summer 2018 shows, the much anticipated “Off White c/o Jimmy Choo” collaboration will be launched globally on 21 February 2018 both online and in store.

    To mark the occasion, the two brands will open a pop-up store in Galeries Lafayette on Boulevard Haussmann in order to showcase the original collection’s different looks. The space will remain open until 4 March 2018.

    The collection is Jimmy Choo’s first partnership with a ready-to-wear designer for a line of commercial footwear.

    The brand has teamed up with Off-White, headed by fashion prodigy Virgil Abloh, which has previously worked on collaborations with sportswear-inspired brands such as Nike.

    The pieces in the collaboration were inspired by Diana, Princess of Wales, channeling iconic 90’s design while also incorporating details reflecting current trends in order to appeal to the needs and tastes of modern princesses.

    In this spirit, the collection features conceptual shapes, tulle, floral embellishments and gemstones.

    Speaking of the collaboration, Sandra Choi, Jimmy Choo creative director, explained, “To collaborate with a brand like Off-White allows Jimmy Choo to explore a new avenue and take part in a different conversation.

    I love to mix it up by getting together with a different creative mind, identifying our synergies and combining our DNA to create a beautiful and surprising collection with unexpected links to the roots of our brand.”

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  • Michael Kors numbers is worrying

    Michael Kors numbers is worrying

    The latest numbers from Michael Kors are far from being a good result, indicating a distinct lack of momentum at the brand.

    In some divisions, the Michael Kors brand has experienced a reversal of fortunes since the last reporting period and the results highlight the company was not one of the winners this holiday season as it was not able to capitalise on heightened consumer spending and confidence.

    An overall sales growth of 6.5 per cent might look reasonable enough, however, this is inflated by the addition of revenue from Jimmy Choo, which contributed $114.7 million during the quarter. Remove this, and revenue fell by 2 per cent. Even this number is flattered by some favorable currency movements; take these into account and revenue dipped by a rather more depressing 3.9 per cent.

    Admittedly, part of the decline at the core brand is down to a pullback from unfavorable sales channels. However, as this process has been ongoing for a long period, it cannot be used to explain away the weak performance entirely.

    Michael Kors has full control of its retail business, where it reported modest growth of 1.1 per cent. However, that number hides some worrying weaknesses: all of the growth in retail came from the opening of 32 new stores over the past year. And at a regional level, only Europe and Asia increased revenue. Within the Americas, retail sales decreased by 4.5 per cent and the poor store performance contributed to a global comparable sales dip of 3.2 per cent. Worryingly, all of the growth numbers are materially worse since the prior quarter. In other words, while the overall retail and luxury market strengthened, Michael Kors’ performance deteriorated.

    The sales softness might be acceptable if the company could point to a stronger bottom line. However, this is not the case. Operating margins were static in the retail group and fell for the Michael Kors division as a whole. As a consequence, operating income fell by 8.3 per cent over the prior year. With its relatively weak margins, Jimmy Choo did little to offset this.

    Despite attempts to revive the brand, it is clear that Michael Kors has lost momentum and is now heading in the wrong direction. This does not mean the strategy is entirely wrong; indeed, we would argue that the company is stronger now than it was a couple of years ago. However, Michael Kors needs to review its positioning and think about how it can connect more effectively with consumers.

    One of the issues is that Michael Kors is a fairly brash brand that lacks the softness of classic luxury labels. This plays well in some segments, but it alienates others – and that alienation is growing as consumers increasingly look for authentic and unassuming products. Admittedly, this is a difficult balancing act for Michael Kors, as it needs to be edgy and distinct, but at the same time generate broader appeal. However, we believe the balance is currently wrong.

    Jimmy Choo has been more successful at squaring this circle and has a playbook that Michael Kors should look to emulate.

    Overall, we do not see Michael Kors unfavourably, and we believe management has addressed many of the weaknesses that previously plagued the company. That said, it is clear there is a lot more work to be done before better results come through.

    -Neil Saunders

  • Jimmy Choo Japan steps to the fore

    Jimmy Choo Japan steps to the fore

    Jimmy Choo Japan delivered the strongest performance internationally for the luxury shoe brand’s first half.

    While there was strong growth across Asia, Japan shone with an 11 per cent rise in revenue on a constant currency basis.

    Growth was underpinned by the men’s category, says the company. It continues to be the fastest-growing category, and in Japan it represented 28 per cent of revenue for the six months, up from 26 per cent year on year.

    Excluding Japan, Asia had 8.2 per cent revenue growth with all territories delivering strong like-for-like growth.

    “Mainland China continues to experience double-digit like-for-like growth, driven by increased brand awareness and greater demand for the seasonal fashion offerings,” says Jimmy Choo.

    “We have also seen strong results in Malaysia and Singapore following the conversion of franchise stores to retail in 2015, driven by improved merchandising and store performance.” Within wholesale, the company continued to expand its travel-retail footprint with the opening of two franchise doors.

    Overall revenue for the brand grew by 4.5 per cent on a constant currency basis (16.5 per cent on a reported basis), with growth driven by retail rather than wholesale. Retail revenue was up 6.7 per cent to £127.1 million (US$164.5 million) while reported revenue was 18.5 per cent  ahead of last year.

    Good performance continued from the company’s new concept stores despite disruption from its store development program. Eight store were renovated or relocated during the period. As at the end of June, more than half the company’s outlets, including the seven flagships, had the new concept.

    Meanwhile, Jimmy Choo says its online business, at 6.3 per cent of total revenue, performed particularly well with sales growth of 3.5 per cent.

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  • Jimmy Choo profits jump 174%

    Jimmy Choo profits jump 174%

    Luxury shoemaker Jimmy Choo Plc, which is being bought by U.S. retailer Michael Kors, said its pretax profit for the half year almost tripled, helped by its retail and licensing businesses.

    Pretax profit for the six month to June 30 was 18.1 million pounds ($23.4 million), compared to 6.6 million pounds last year. Revenue for the period rose 4.5 percent to 201.6 million pounds.

    Michael Kors agreed two months ago to buy Jimmy Choo for $1.2 billion, snapping up the British company whose towering stilettos have been made famous by celebrity customers from Princess Diana to Kendall Jenner.

    Jimmy Choo Chairman Peter Harf said the deal opened up exciting opportunities.

    “The shared vision and distinctive appeal of these two iconic brands will provide an exciting platform to achieve global leadership in luxury retail,” Harf said in a statement.

    Revenue at the company’s Japan unit rose 11 percent at constant currency helped by continued growth in its Men’s section.

    Excluding Japan, the company’s Asia business grew 8.2 percent at constant currency, driven by strong demand for seasonal fashion offerings.

    Shares in the company were up about 0.2 percent at 0740 GMT on the London stock market, trading close to the 230p offer price. ($1 = 0.7747 pounds) (Reporting by Sanjeeban Sarkar in Bengaluru; Editing by Keith Weir).

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  • Michael Kors should tread carefully with Jimmy Choo

    Michael Kors should tread carefully with Jimmy Choo

    Both Michael Kors and Jimmy Choo can extract significant benefits from the acquisition announced this week, says Pascal Martin, partner with OC&C Strategy Consultants.

    But he warns there “are limits” to how much and how fast a luxury brand can expand its network before starting to dilute its equity.

    “Michael Kors has been enjoying very rapid expansion and could be feeling that it has reached saturation in certain markets – for example, 300+ stores in the US, 50+ in Japan and 50+ in China.

    “Louis Vuitton and Coach have run into this problem where they really pushed growth but realised they had to slow down and even shut down a few stores to regain some level of “scarcity”.

    “Burberry is another brand which flirted with that risk, particularly in China and Hong Kong, before it also took some measures to prune its network. When this happens, and if the brand is cash-rich, the best way to continue to grow is to buy another brand that is still relatively under-distributed and has room to grow without the risk of brand erosion – this is probably how Michael Kors sees the Jimmy Choo opportunity. Likewise, we could potentially see Burberry adopt a similar strategy under the leadership of its new CEO Marco Gobbetti,” says Martin.

    “Being acquired by Kors is a great opportunity for Choo to benefit from Kors’ global reach and experience to help accelerate its growth. There is good complementarity between the two brands, in terms of target customers: more premium for Choo; geographies – Asia and US are more developed for Kors, but Europe stronger for Choo; and product range – Kors isn’t really strong in shoes.”

    Martin says that looking forward, Kors will need to keep an eye on Choo’s positioning within the premium shoe market, as it is more selective than Kors’ positioning within luxury.

    “Kors is more like Coach or Tory Burch on the access luxury side of the market. Choo is closer to a Christian Louboutin – very high-end and expensive, with a significant custom-made offering.”

    Martin says there is a risk that expanding Choo’s distribution too fast – as Kors has done with its own brand – may create operational issues relating to quality and logistics, and brand damage.

    Furthermore, stock management in shoes comes with added complexity due to multi-sizing, and possibly multi-shapes – for example to cater to Asian customers.

    “Shoe retail channels are more complex than for accessories. There is actually a lot of value from a customer’s standpoint in being able to try shoes in an multi-brand environment. Therefore, the Choo distribution expansion will be different in nature to that of Kors, with much more reliance on department stores than on stand-alone branded stores,” Martin concludes.

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  • Michael Kors to buy luxury shoemaker Jimmy Choo for $1.2 billion

    Michael Kors to buy luxury shoemaker Jimmy Choo for $1.2 billion

    Michael Kors has been struggling in recent quarters with declining same-store sales as fewer people visit its shops. U.S. retailer Michael Kors has agreed to buy luxury shoemaker Jimmy Choo for $1.2 billion, snapping up a British brand launched in the east end of London and made famous by celebrity fans including Princess Diana.

    Founded in the 1990s by bespoke shoemaker Jimmy Choo, the brand is known for its stiletto heals and accessories and sells in cities from London to Paris, New York and Tokyo.

    It put itself up for sale in April after its majority owner JAB signaled its intention to focus on consumer goods. At 230 pence in cash per share, the group is receiving a premium of 36.5 percent to its share price before the sale process was announced.

    Michael Kors, once the hottest name in affordable luxury with a hugely popular handbag range, has been struggling in recent quarters with declining same-store sales as fewer people visit its shops.

    In response, it has expanded into dresses and menswear, and invested in its online business. It said Jimmy Choo would continue to operate as it does today, under its existing management team.

    “Jimmy Choo is an iconic premier luxury brand that offers distinctive footwear, handbags and other accessories,” said Michael Kors, honorary chairman and chief creative officer.

    “We admire the glamorous style and trend-setting nature of Jimmy Choo designs.”

    Jimmy Choo floated on the London Stock Exchange at 140 pence in 2014. It closed on Monday at 195 pence.

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