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Earnings

Chinese demand powers Versace owner Capri's profit beat

(Reuters) - Versace owner Capri Holdings Ltd CPRI.N beat second-quarter revenue and profit estimates on Thursday, buoyed by strong demand for its luxury apparel and accessories in China and surging online sales.

The fashion house’s shares rose 10%, even as the company said sales would remain pressured for the rest of the year as fresh coronavirus lockdowns have recently been imposed in major European markets.

China, which has emerged from lockdowns, is seeing a strong recovery in demand for luxury goods as the country’s wealthy shop more domestically, helping offset a slump in sales from fashion capitals in other parts of the world.

“Consumers are spending at higher rates on luxury products, as there has been reduced spending on experiences due to travel restrictions,” Chief Executive John Idol said.

Capri said sales in China were positive across its three brands- Michael Kors, Jimmy Choo and Versace- in the second quarter, echoing recovery trends reported by rivals Coach owner Tapestry Inc TPR.N and Europe's LVMH LVMH.PA.

Versace in particular saw a strong rebound in demand, as its global retail sales grew, while price increases at Michael Kors and Jimmy Choo have also helped margins.

CEO Idol said Michael Kors’ eponymous founder being outspoken about voting in the U.S. presidential election also drove consumer engagement and brought in new customers.

Capri forecast full-year sales to fall about 30%, below the drop analysts had expected, and holiday quarter sales to decline double digits.

Total revenue fell 23% to $1.11 billion in the quarter ended Sept. 26, beating analysts’ expectations of $924.9 million, as a drop in wholesale demand was softened by a triple digit jump in e-commerce sales.

Excluding items, Capri earned 90 cents per share, beating expectations of 4 cents per share, according to IBES data from Refinitiv.

Reporting by Aditi Sebastian and Uday Sampath in Bengaluru; Editing by Shinjini Ganguli

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