Capri, Taperstry Sales Downturn, Multi Brand Strategy Hard To Pull Off Performance

In recent years, luxury brands and street tide brands have been cutting more stable consumer groups or even younger consumer groups with distinct market positioning.

Michael Kors parent group Capri group recently released the latest report shows that in the third quarter ended December 29, 2018, the group's revenue was $1 billion 440 million, almost unchanged from the same period in 2017.

Among them, the third quarter, the core brand Michael Kors sales fell 4% to 1 billion 276 million U.S. dollars over the same period.

Although Jimmy Choo sales rose 49.9% to 162 million dollars, offset the impact of the decline in Michael Kors revenue, but the group's overall net profit still fell 9.1% to 190 million U.S. dollars.

Compared with Capri group's last quarter, sales volume increased by 9.3% to 1 billion 250 million US dollars, while net profit fell 37% to 138 million US dollars, operating profit of 189 million US dollars.

Among them, the core brand Michael Kors sales fell 0.8% to 1 billion 137 million U.S. dollars over the same period, a decline in the number of stores than the number of single declines.

Jimmy Choo brand sales amounted to $117 million.

In addition to the Capri group, Taperstry, which has Coach (thematic reading) and Kate Spade's light luxury group, is also facing poor performance. The results show that, in the second quarter of December 29, 2018, the operating profit of Tapestry group fell 2% to 402 million US dollars, and net profit increased 301% to 254 million 800 thousand US dollars, because the net profit base last year was only 63 million US dollars.

During the period, the sales of core brand Coach increased by 2% to 1 billion 250 million US dollars, while same store sales increased by 1%. Before the acquisition of Stuart Weitzman sales increased 3% to 124 million US dollars, it was still difficult to make up for 428 million US dollar sales which were unexpectedly dropped by Kate Spade, which was purchased from the brand. According to the data, Kate Spade's same store sales even dropped 11%.

In fact, these two extravagant groups have been buying high-end brands in recent years, trying to build upscale brand image and product line, and better compete for the pricing power of fashion products. However, the multi brand strategy has not reached the desired effect, and the performance is still declining.

Take Capri group as an example. In September 2018, the group announced that after buying Versace with a total value of 1 billion 830 million euros, or about 2 billion 120 million dollars, investors sold Michael Kors Holdings Ltd. (KORS) stocks in large numbers. In the past three months, Capri group's share price plummeted 1/4. In November 2017, Capri Group acquired Jimmy Choo with 1 billion 200 million dollars in cash, and tried to make full use of the competitive advantage and influence of Jimmy Jimmy in women's shoes, handbags and other core businesses.

According to the terms of the paction, the purchase price of Jimmy Choo is US $3 per share.

According to MarketWatch2018, Jimmy Choo is still lower than market expectations, although sales have risen since the same period in 2017.

There are two main reasons for the slumping performance of light luxury brands.

On the one hand, influenced by policies and markets, some luxury brands began to make price reduction strategies, so the living space of light luxury brands was squeezed.

Data show that in 2018, luxury brands such as Hermes, LV, Gucci and so on all implemented a price reduction strategy in the Chinese market, and the price range of LV was between 3% and 5%.

In addition, many high-end luxury brands have launched relatively inexpensive sub line products to expand potential consumer groups, such as Prada's Miu Miu and Chloe's secondary line see by Chloe, which have gained a good response in the market.

The Wall Street journal points out that in the future, more and more high-end brands will fully occupy the light luxury market by slightly reducing their value.

On the other hand, whether high-end luxury brands or light luxury brands, the Chinese market is still the engine of growth, while "light luxury" is losing the Chinese market.

First, the audience of light luxury group coincides with the tide brand market, and the consumer group is shunted. Secondly, with the increasing awareness of domestic consumption upgrading and the price advantage of light luxury consumption no longer, the British Reuters reported that Chinese luxury consumers are less sensitive to price and are more willing to spend money on luxury goods.

To sum up, apart from the market downturn and the variability of industries, light luxury brands should face not only the challenges of other luxury brands, but also the pressure from high-end luxury brands and the impact of tide brands.

Although light luxury brands are now looking for a collectivization development mode, trying to gain market competitive advantage through multi brand strategy, but for light luxury brands, the upward pressure on development is still very large, unlike luxury goods, which can squeeze space for development.