While consumers and retailers have held up surprisingly well through a challenging world, from war to inflation to political uncertainty, the fashion industry remains vulnerable to Wall Street shocks.
Consider this a reminder of how quickly trends can change.
Luxury and fashion stocks sold off on Wednesday as the ceasefire between the United States and Iran threatened to collapse and the International Monetary Fund warned that global economic growth would slow to 3% this year from an average of 3.5% over the past two years.
The Dow Jones Industrial Average fell 1.1%, or 576.76 points, to 52,348.39, and fashion followed suit.
Among the biggest decliners in the global fashion industry was Capri Holdings, which fell 7.8% to $17.90. Bath & Body Works Inc., $19.39 at 6%. Kohl’s Corporation, 5.2%, $15.89. Kering fell 5% to 239.65 euros. Hermès International, 4.2 percent to 1,570.50 euros. Tapestry Co., 4.2 percent, $140.14; Inditex was at 4% at 54.16 euros, Brunello Cucinelli at 3.8% at 78.82 euros.
The Iran war, what would happen if it really flared up again, and how the oil crisis already affected by the conflict would ripple through the broader economy, is almost the definition of “out of control” for fashion CEOs.
Corporate titans prefer to ignore big macro changes and instead focus on the “controllables” they can influence.
So did Capri Holdings Chairman and CEO John Idle, who attended the Bernstein Investor Conference in New York to talk about all the changes at his company.
Capri, which was slated to become part of Tapestry before the deal was suspended due to antitrust violations, sold Versace last year and dramatically cleaned up its balance sheet, ending the year with more than $200 million in debt.
This allowed Capri to focus on its Michael Kors and Jimmy Choo businesses.
“Brands go through cycles,” Idol said. “They go up and down at different points. And when we looked at our portfolio, we thought there was a great opportunity to focus on Michael Kors. And that’s when we made the decision to sell Versace.”
Idol is trying to bring Michael Kors’ sales back to about $3 billion to $4 billion, while Jimmy Choo is increasing sales by $600 million to $800 million.
It’s a multi-part plan that includes investing in stores, boosting marketing, reducing stock-keeping units, focusing on trend-driven styles, and, importantly, re-pricing.
“When we looked at our pricing structure, sell-through was down and markdowns were up. And we found that was a result of the COVID-19 price increase, which was about 20-25%,” Idle said. “So we went back and moved closer to the brand’s traditional historical pricing. And what happened after that, and this is in our full-price channels, both in our own stores and wholesale, was that our full-price sell-through went up dramatically, [average unit retail prices] Prices are rising because there are fewer discounts. ”
And it’s all in the idol’s control.
Bigger problems need to be solved for themselves, but consumers are still buying, even if they need a little more to consume, the CEO said.
“Everyone is just being a little more cautious about their purchases, whether they’re at the top end of the luxury spectrum or at another income level below that,” Idle said. “They’re still buying, but they’re just making sure that something is obviously exciting from a design perspective first.” [and] That there is quality. ”
He said North American customers remained “relatively healthy” despite “concerns about rising costs for everything from fuel to groceries to rent.”
But Idle added that although Capri had become “a bit more cautious about the fate of Europe” over the past three months, it was “relatively stable.”
“There is definitely an issue with tourism,” the CEO said. “In particular, Middle Eastern tourists don’t travel to Europe. We do quite a bit of business with Middle Eastern tourists at both Jimmy Choo and Michael Kors. So we’re feeling the impact in Europe as well, and we’re seeing people being hesitant to shop in the Middle East region.”
“I’m optimistic about China. Consumers are definitely starting to improve. And while I don’t think the economy is going to crash, I think you can see consumers coming out,” Idle said.
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