Do Versace And MK Become The LVMH Of The US?

The United States can build its own road.

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This is a problem that has been debated for years. American companies have tried again and again to make a group of those who have the potential to one day with the largest in the world.

Group competition

Gather together.

The Tapestry group with Coach, Stuart Weitzman and Kate Spade is headquartered in the United States, and has won the position of "an easy leader in luxury", but its brand status and scale can not be compared with the Louis Vuitton and Dior owned by Lu Wei Xuan group.

The same is true of Tommy Hilfiger and Calvin Klein's parent company PVH.

Michael Kors, Jimmy Choo and Versace's Capri holding company (Capri Holdings) are regarded as the most likely companies to accomplish this task today.

Although the company has a long way to go to reach the size of Lu Wei Hun Xuan, the market capitalization of 130 billion euros is dwarfed by the $6 billion Capri. However, whether the majority of Americans misread its name, the group named after the charming Italy Island changed its name from Michael Kors Holdings in December 31, 2018, and its headquarters may be located in New York. However, its composition Michael Kors, Jimmy Choo and Versace reflects the composition of the global fashion industry.

The three companies are located in three different countries.

Capri did not plan to develop an approachable luxury group like Tapestry, or a clothing driven integrated enterprise like PVH.

Instead, the company's goal is to become a pure luxury company. Its chief executive, John Idol, insists on this mode, although Michael Kors's luxury positioning is obviously very approachable.

Idol has been managing Michael Kors since 2003, and its brand sales amounted to US $4 billion 500 million in 2018.

He said he was trying not to create luxury brands, but a real luxury group: a powerful luxury group that could keep pace with European leaders LVMH, Kering and Richemont.

The three groups have more than 100 global luxury brands.

This is a difficult task.

But Idol was not intimidated.

"We believe that in the next 20 to 30 years, there will be the longest growth in the luxury market."

In an interview with the CEO at the group headquarters overlooking Bryant Park recently, the CEO said, "we are fortunate to be able to acquire two companies so quickly, and they are all led by the founders."

The founder's leadership is very important for Idol.

This is the case with Versace, a Italy fashion company bought by US $2 billion 100 million earlier this year. Donatella Versace worked with her brother Gianni Versace for many years. After her death in 1997, she took on the brand responsibility.

The same goes for Michael Kors, New York. When the company went public in 2011, he became a billionaire with the expensive handbag boom.

Jimmy Choo, the niece of the same name, and Sandra Choi, who has been the creative director of the company since 1996, has also stayed.

(the London based shoe brand was bought by Michael Kors at a price of $1 billion 200 million in 2017.

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"We have three secret weapons," Idol said.

"We will not change that."

Management will not change much.

Idol will continue to operate Kors, and Jonathan Akeroyd, the former chief executive of Alexander McQueen, who is considered to be ready for the sale of Versace, and Pierre Denis, chief executive officer of Jimmy Choo, will remain in office since 2012.

However, as these brands adjust their models in order to achieve this lofty goal, they are undergoing many changes.

The success of Lu Wei Ming Xuan and Kai Yun group is partly due to their influence.

With so many brands, they can negotiate better retail pactions and media purchases.

They also have a large number of executives, many of whom have been trained by companies to get in and out of different brands because they understand the culture of the group.

The ability to share resources from the back end (from technology to manufacturing) is also valuable.

But most importantly, these groups decided to take the long road from the beginning.

This is very important for establishing and maintaining the brand as part of the cultural structure, especially the capital intensive luxury brands, which are vulnerable to the ups and downs of the trend.

According to the world clothing and shoe net, in the past few years, if a designer's design concept can not be sold, Kai Yun group and Lu Wei Ming Xuan will soon change the role of creative director.

But they are careful to retain the brand's history and tradition in their external exchanges.

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By contrast, luxury brands in the United States tend to experience a cycle of prosperity and depression. They will expand too much - often introduce cheaper products to increase sales and meet the needs of the stock market, and stifle their cultural reputation in the process.

From Calvin Klein, Ralph Lauren, Donna Karan to Marc Jacobs, and Michael Kors, of course, are the products of this system.

This is why you can still find products in discount stores like T.J. Maxx, but you can't find brands like Dior or Gucci.

Luxury analyst Luca Solca said in 2017: "compared with Europe, this led to a luxury mode based on higher non price participation, wider distribution and lower entry price points."

In Capri, a large part of the revenue comes from the sales of entry-level products of Michael Kors.

In order to remain on the luxury track, readjustment, or even more extreme changes, must take place.

Part of the adjustment is to reflect the effect of one brand on other brands.

For example, Michael Kors has too many stores, and Versace is too few.

Each brand needs to give priority to digital sales ("website is flagship now," he said), and better use of China's market opportunities.

(Asia currently accounts for only 19% of the group's total sales; Idol's goal is to raise this share to 30-40%.

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If he succeeds, Idol believes that Capri can generate $8 billion in global income in the next few years, making his current annual sales increase by $2 billion.

But what does he need to do to achieve this goal?

Regression of MICHAEL KORS

The future precaution of Michael Kors is a crucial first step.

Sales of the brand have declined in recent years as the company continues to implement plans to close 100 private stores and try to reduce its dependence on Oteri J.

In the most recent fiscal year ending March 2018, sales of Michael Kors brand were $4 billion 500 million, unchanged from 2017, lower than US $4 billion 700 million in 2016.

Some of these contractions are purposeful and are related to the reduction of discounts; the other part is related to excessive distribution and widespread low price commodities.

But this is still a very profitable brand, creating enough extra cash to start buying other companies.

However, in order to maintain the status quo, Idol will have to adjust its brand's products to further develop high-end apparel and luxury accessories business so as to reduce its dependence on the hottest clock business.

This is part of the authorization agreement signed with Fossil.

Fossil brought over $630 million in revenue to the watch maker in 2017, but it is still shrinking in front of smart phones and smart watches.

In the 2018 fiscal year of the group, royalties for licensed products amounted to $145 million, slightly lower than the previous year's $146 million.

The company attributed the decline to sales of fashion watches, jewellery and perfume, while sales of smart watches and glasses offset this decline.

Michael Michael Kors handbags have become less popular among the mid priced products sold in Macy Messi and cheap retailers.

Idol said the brand also did not take full advantage of the trend of sign craze.

"We did not advance in the way we should," he said.

To make up for this, Kors is rethinking its marketing strategy, from the brand image itself to their way of communication.

(in November 2017, the company hired senior Valentino employee Francesca Leoni as the chief brand officer of Michael Kors, indicating that the company's practices are changing).

In February 4th, Michael Kors will issue a new Michael Michael Kors MMK (2019) series of advertisements in spring and summer. It will take "signature" as the title -- from trademark to product, from Bella Hadid to model, David Sims shooting.

Although notorious photographer Mario Testino has been the first choice for Kors, the brand has recently started working with Sims and Inez & Vinoodh, which has taken pictures of the brand in the 2019 spring series.

Although the concept of "Jet Set" lifestyle is still the core of Kors, the designer himself is still the ultimate spokesperson, but this concept has been upgraded to a new visual language and a new communication strategy.

In 2018, the group spent about $167 million on advertising and marketing, up from $119 million a year ago.

Although the company has not yet broken down the difference between its digital and print expenditure, a spokesman said that in key markets, some brands have been digitalized.

Idol said that the brand's ready-made clothes -- the expensive T series sold in selected retailers and Michael Kors's stores -- is one of the fastest growing segments of the group, and the company is already making up for the slowdown in the sale of cheap packages, and the demand for higher priced accessories such as "Bancroft" handbags is increasing.

According to Idol's past estimate, Michael Kors's menswear business itself may become a multi billion dollar industry.

Although the men's clothing industry will take longer to develop, Michael Kors will soon introduce the men's shoes business in the 2019 fall series as a supplement to Idol's large female shoe business.

Entering the high-end market is almost impossible, but Kors has been a designer brand since 1981.

In the past 15 years, the brand's low price products really become the mainstream.

At that time, Lu Wei Min Xuan sold 33% of its shares to investors Silas Chou, Lawrence Stroll and Idol, thereby turning the business into a more dependent and easy to use luxury.

Shortly after Lu Wei Ming Xuan gave up his stake in Kors, the designer ended his career as a creative director at Celine, a luxury company in France.

Idol said Capri is deeply committed to the success of Kors's mid market business, despite its investment in luxury goods.

He believes that these two acquisitions, as well as the purchase of factories and other facilities to help support these enterprises, is evidence.

"You will hear some supplementary statements about other measures we will take in infrastructure," he said.

In addition, the group has not yet designed a low price plan for Jimmy Choo and Versace.

Enhanced VERSACE power

For Versace, brand image is far from being a problem.

Donatella Versace and her early supermodels have become the embodiment of worshipping around the world.

However, the strength of the brand is far greater than the scale of business that the company can establish.

Idol expects that Italian company's sales in the next few years will more than double to $2 billion, thanks to global visibility and greater investment from retail networks to manufacturing capabilities.

At present, Versace has 195 stores.

The company plans to increase this figure to 300 and expand its handbags and women's wear products.

Men's clothing occupies the market share of Versace 49%, which is unusual for luxury brands.

At present, 46% of the company's sales come from Asia, and only 18% come from the Americas, and Idol says it is underdeveloped in the region.

To a large extent, Versace is also promoted by the garment industry. The company owns handbag business in name. In view of its good economic performance, this is a major structural disadvantage.

This imbalance, he said, is equal to opportunity: if the brand can continue to ride the nostalgia, Donatella Versace cleverly grasped her T series, and in the current popular categories, such as sports shoes to increase strength, doubling sales is possible.

Of course, this revival will not last forever.

"All brands will rise and fall, which is only part of the luxury industry," Idol said.

"There will always be moments like this...

He is in the hottest position and there will be times when he is left out.

To be frank, that's why a team is important.

Not everything will come true. "

He went on to point out that Versace has been growing almost every year since its opening in 1978.

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Although this trend may yield short-term gains, Versace can rely on accessories business in the long run.

But it's not easy to make a handbag.

Many luxury brands from luxury brands, from Chanel to Dior to Balenciaga, Saint Laurent and Celine, have been successful in bags, but the market has never been as crowded as it is now.

At the same time, consumers are turning consumption into footwear.

To achieve sufficient growth, Versace must succeed in these two areas.

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Whether Versace can win in the field of handbags is a major problem.

Luxury analyst Mario Ortelli said the key is whether Versace can find a style that makes people feel enduring.

"You want something to be safe," he said.

Upgrading JIMMY CHOO

Jimmy Choo, the smallest brand in the portfolio, must also develop its handbag business.

It will launch its signature "signature" series in the second half of 2019.

The new advertisement, featured by the legendary photographer Steven Meisel, Kaia Gerber, is also a redesign of the brand image.

"She's young and energetic," Idol said.

"(choosing Gerber) is a pioneering moment for us (Jimmy Choo). We need to continue to really convey the meaning of this brand and the company's behalf."

Like Versace, Choo will continue to build its own store network - from the current 213 stores to nearly 250 - and develop the brand that is famous for its sexy and classic style, not just for shoes.

However, in the long run, Capri as a whole will benefit from deeper penetration in China.

Although trade battles with the United States have exacerbated the economic slowdown in the region, more middle class shopping in the area means greater demand for new market makers.

"Until recently, top and high-end brands also firmly control Chinese consumers."

Ortelli says.

"But with the growth of the middle class, there are more and more opportunities.

Even if the economic growth slows for one year, it does not mean that the situation will always be the same.

Idol also has to deal with doubts from shareholders. Many of them believe that the price of Capri's acquisition of Versace is too high, resulting in a sharp drop in share prices within a few months after the announcement of the takeover of the company.

In August 2018, the cost per share was close to US $74.

Recently, it has been hovering below $40.

Dylan Carden, a professional retail analyst at William Blair, recently revised its revenue forecast for the 2019 fiscal year. The fiscal year will end in March because profit margins are already below the average level of luxury goods, because the company is investing in new outlets for Versace and Jimmy Choo, building larger accessory businesses and investing more in total marketing.

"The core performance of the Michael Kors brand has deteriorated and we do not see any meaningful signs of recovery," Carden wrote in a recent report.

Despite the pressure from shareholders, Idol has taken a long-term view.

He said: "in any industry, whether luxury or consumer goods industry, there will be such a moment: the different departments of your company will perform better than other departments.

Michael Kors will grow.

Its growth rate will be slower than that of the other two companies.

Once people see our implementation in a few quarters or a year, they will see very positive results when they see good results.

We have made clear what we believe we can achieve.

You must realize your vision. "

However, although Idol has great ambitions for the group, don't expect a crazy shopping Carnival in 2019 or 2020.

"In the next 24 months, we will focus on the development of Versace because we have had a very large-scale takeover.

We are still concerned about the development of Jimmy Choo.

Of course, in terms of revenue and profit, Michael Kors will continue to be our most important brand, so we need to pay close attention to this.

If there is anything very interesting, unique or special, I think we will consider it.

But this is not our priority now. "

After all, Lu Wei Ming Xuan group was established in nearly 40 years, and Kai Yun group has been established for more than 20 years.

It takes time to get on the right track.

So, don't be too excited.

"It's too early to conclude," Ortelli said. "We will wait and see."

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