10 Years Of Fighting Miachel Kors And Coach Suffer From Both Sides

The aggressive M & a strategy has made Michael Kors and Coach's two big brand parent companies lose both sides, while Tapestry Inc. (NYSE:TPR) has been involved in the continuous recession of KateSpade. Capri Holdings Ltd. (NYSE:CPRI) has plummeted due to the net profit of the investment in Versace, which has disappointed Wall Street.

As of the 2019 quarter of March 30th, the net profit of Capri Holdings Ltd. fell to 19 million US dollars or earnings per share of 0.13 US dollars from 44 million US dollars in 2018 or 0.29 US dollars per share in the same period of 2018, adjusted 95 million US dollars or earnings per share of 0.63 US dollars, which is basically the same as the 97 million US dollars in 2018, and also better than Zacks and Refinitiv expected US $0.61.

Fourth quarter, the group's revenue increased by 13.9%, from 1 billion 180 million US dollars to 1 billion 344 million US dollars, slightly better than Refinitiv and Zacks's expected $1 billion 330 million, and the fixed exchange rate increased by 16.5%.

The revenue growth includes $137 million from the new business Versace, and the growth of Jimmy Choo Zhou Yangjie 28.7%.

Although both earnings and earnings exceeded market expectations, the more valued season performance outlook for investors was significantly lower than Wall Street expectations.

Capri Holdings Ltd. said that overthrowing the original plan and increasing investment in Versace extinguished the enthusiasm of investors. Capri Holdings Ltd. (NYSE:CPRI) dropped by a maximum of $35 before Wednesday.

Capri Holdings Ltd. for the current 2020 fiscal year first quarter earnings expectations are far below market expectations, including the negative impact of $0.15 on earnings per share invested by Versace, EPS is expected to be only 0.85 - 0.90 dollars, Refinitiv is expected to be $1.23.

In the first quarter, Capri Holdings Ltd. expected to earn $1 billion 360 million, which is also lower than the $1 billion 450 million expected by the market.

In Wednesday's performance report, Capri Holdings Ltd. lowered its revenue forecast from US $6 billion 100 million to US $6 billion in the current fiscal year, which is mainly reflected in the Michael Kors brand income forecast from $4 billion 550 million to US $4 billion 450 million, while Versace and Jimmy Choo are 900 million and 650 million US dollars respectively.

Over the past two years, the two largest luxury brands in the US, Michael Kors and Coach, have been expanding for 10 years since the financial crisis.

Coach renamed Tapestry Inc. after the acquisition of Kate Spade, and Michael Kors was more radical to buy two big luxury brands, of which a huge deal of $2 billion 120 million for the Italy brand Versace was referred to as a premium, and the company changed its name to Capri Holdings.

In the accelerated competition, Tapestry Inc. and Capri Holdings Ltd. are all suffering from the joy and pain brought by the new brand.

Since the accession of Kate Spade to Tapestry Inc., it has never achieved positive sales performance in the same store, although the company claims that the synergy effect provides a streamlined cost space, while Versace brings in US $1 billion revenue for Capri Holdings Ltd., which is bound to erode the company's business profitability and profitability in the short term.

Capri Holdings Ltd. expects that in the first quarter of fiscal year 2020, the operating profit margin of Versace is negative, and the median sales growth in the same store is 200 million US dollars.

The addition of new brands will also weaken the investment and energy of the two groups to the flagship brand to a certain extent.

The current downturn in Michael Kors and Coach is obviously not in line with the traditional luxury competition camps of Gucci Gucci, Louis Vuitton Louis Weedon and so on.

In the 1-3 months, the two brands of LV and Gucci had double digit growth, while Coach brand income declined 0.4% and fixed exchange rate increased 1%.

In the past four quarters, Michael Kors brand sales recorded a slight decline of 0.4% to $1 billion 68 million, compared with $1 billion 72 million in the same period in 2018, while the fixed exchange rate increased by 1.8%, while the same store sales decreased by 1%. The total income of the brand in the fiscal year was 4 billion 511 million US dollars, a slight increase of 0.3% compared with 2018 4 billion 496 million, and a fixed exchange rate increase of 0.8%.

Group chief executive John D. Idol commented in the press release that 2019 was the year of Capri Holdings Ltd. pformation, and said that the current fiscal year is the group investment year, and reiterated the long-term goal of US $8 billion revenue, including the increase of Versace from US $900 million to US $2 billion sales target, the sales target of Jimmy Choo from US $600 million to US $1 billion, and the increase of our brand Michael Kors revenue from 4 billion 500 million US dollars to US $5 billion.

In fiscal year 2019, Capri Holdings Ltd. revenue increased by 11%, from $4 billion 719 million to $5 billion 238 million, and fixed exchange rate increased by 11.7%; annual net profit of 543 million US dollars or earnings per share of 3.58 US dollars, a decrease of 8.3% over the same period last year of 592 million US dollars or earnings per share of 3.82 US dollars. After adjustment, the net profit of 753 million dollars or earnings per share was about US dollars, which has a slight increase compared with the US dollar or earnings per share in the fiscal year.

Capri Holdings Ltd. (NYSE:CPRI) maintained the expectation of US $4.95 in 2020 adj EPS, and Versace investment will cause a loss of about $0.25 per share during the period.