What’s Next for Capri Holdings Limited?

According to Vogue Business, the global fashion luxury group, Capri Holdings Limited, has had a rough year, with shares dropping more than 16 percent to date. And despite Michael Kors’ ambitions of creating an American luxury conglomerate, missteps such as the Versace T-Shirt scandal that erased 5% from the company’s first quarter earnings, the continuing protests in Hong Kong, which have increased expenses and lowered profit margins, and various other miscalculations have wreak havoc inside company. To begin with, management for the Michael Kors brand has decided upon a rather ambitious strategy that sees the business expanding beyond its core handbag business, and instead transforming into a full on lifestyle brand overnight. For the majority of Michael Kors customers that identify it as an entry-level luxury brand that heavily discounts products and sells its accessories collection at outlets and off-price department stores, the rebranding of the company into an authentic luxury player has not been an easy switch. Moreover, the concept of “accessible” luxury is struggling globally. With the rise of online consignment shops such as Poshmark and Vestiaire Collective, and the growth of fashion resale markets, buyers are trading up and investing in luxury products that are pre-owned instead of buying new, affordable luxury pieces. Secondly, Jimmy Choo needs to innovate if it wants to thrive in this dynamic market. A large segment of Millennials and Gen. Z consumers have propelled the sales of athleisure brands, transforming sneakers into status symbols; thus, lady-like stilettos have lust a bit of their lux and social credit for the younger and prodigal consumer base. Thirdly, miscalculations such as the Versace T-shirt controversy can’t be treated lightly. Culturally insensitive ads, racist stereotypes, or questions on territorial integrity and sovereignty are dangerously provocative in China and can only validate the idea that some Western brands are culturally insensitive. Such practices or missteps have no place in “woke” societies where consumers demand social activism and positive engagement from all businesses. Given that Capri Holdings Ltd. still has serious challenges to overcome, analysts wonder if the group can achieve its ambition of becoming the first American luxury conglomerate. In short, the answer is positive, as timing, the group’s global mindset, and globalization work in favor of Capri. 1. Timing In the past, other American brands have envisioned designing the first American luxury conglomerate, but they failed. One of the most notable examples is Liz Claiborne Inc., later known as Kate Spade & Company. In the early 2000s, Liz Claiborne Inc. pursued an aggressive expansion plan that started with the acquisition of Lucky Brand Jeans (1999) and continued with Mexx (2001), Juicy Couture (2003), and Kate Spade New York (2006). Evidently, the rapid expansion plan was costly. Additionally, the last acquisition couldn’t have come at a worse time as 2008 marked the start of the Great Recession, hitting the retail sector particularly hard. Fast forward to 2019, and the retail apocalypse continues but sales are growing. Furthermore, the luxury segment appears rejuvenated, delivering positive growth. According to the 17th edition of Bain & Company’s annual luxury study, the luxury market “grew by 5 percent at constant exchange rates in 2018 to an estimated €1.2 trillion globally, with overall positive performance across all segments.” This is positive news for Capri Holdings as they continue to spotlight global expansion. 2. The global mindset Michael David Kors (born Karl Anderson Jr.) played this one out brilliantly. Instead of focusing on the all-American allure of domestic brands that resonate with U.S. consumers, Kors went on a global shopping spree, acquiring established luxury players that hold a global appeal. The Jimmy Choo brand was co-founded by a Malaysian fashion designer based in the United Kingdom, while Versace is the epitome of Italian luxury. 3. Globalization and the rise of emerging markets As Western HNWI are embracing inconspicuous consumption, the golden age of extravagant luxury spending is somewhat fading in capitalist societies. Nevertheless, a new breed of moneyed consumers is being formed in emerging markets. In fact, fast-growing economies in Asia, Africa, and Latin America are fueling the growth in the luxury industry. Given that globalization has changed the business landscape for good, international brands that have become disillusioned with their profitability in Western societies, can now move their services and products to new markets. Furthermore, the availability of faster transportation modes and the proliferation of technological innovation and new communication channels aided “the flow of goods, people, and information across the globe". It could be argued that globalization was in full force even twenty years ago when Liz Claiborne Inc. envisioned an American luxury conglomerate, but the following decades have come with incredible advances in science and technology. Globalization has made the world smaller, boosted connectivity, and empowered businesses to move around the world faster and in a more efficient way. Moreover, poverty is being reduced in emerging markets (e.g.: India, China, Brazil, Malaysia) while established Western markets (e.g.: Greece, Italy, Spain) are in decline. Considering that businesses can now move around the world faster, innovative conglomerates such as LVMH, Kering, and even Capri started focusing on emerging markets. The “progress and innovation over the past 20 years alone have changed the world,” according to Business Insider. It’s self-evident that smart luxury brands have evolved, embracing socially conscious innovation and leveraging the power of digital technologies. Given this, Capri has played its cards right, taking advantage of the opportunities brought by the 21st century, and laying the groundwork for an American luxury conglomerate with a global reach.

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What’s Next for Capri Holdings Limited?