- Capri Holdings, the parent company of brands Versace, Jimmy Choo, and Michael Kors, reported earnings on Wednesday.
- Versace saw its sales slide 15% in the latest quarter, and Capri said it was because of two factors.
- It said Versace leaned too hard into the quiet luxury trend and reduced its lower-priced offerings.
The CEO of Versace’s parent company says the brand made two mistakes that caused its sales to slip.
Capri Holdings, owner of Versace, Jimmy Choo, and Michael Kors, reported a 15% dip in Versace’s revenue compared to the previous year. The Italian luxury brand earned $193 million in the quarter that ended on December 28.
Its sales dropped 21% in the Americas and 11% in Asia, according to the earnings report on Wednesday.
In the company earnings call on Wednesday, Capri CEO John Idol said that two things went wrong with Versace — leaning too hard into the quiet luxury trend and reducing the number of its lower-priced offerings.
Idol said that in the fall of 2023, Capri began to reposition Versace by placing a “greater emphasis on luxury and craftsmanship, which was more in line with the quiet luxury trend.”
He said to investors that Versace’s “VIC,” or very important customers, responded positively to the switch to more sophisticated products. But “while elevating the assortment, we believed we removed too many unique Versace statement items,” Idol said.
Reducing the number of entry-level priced goods also meant sales took a hit, he said.
Idol said that Capri reduced end-of-season markdowns in Versace stores as part of its overall brand elevation strategy, which had a “near-term impact on Versace’s revenue.”
“Additionally, we significantly reduced our offerings of products at entry-level luxury price points,” he said, adding that it impacted retail sales as well.
To rectify these issues, Idol said that in the next fiscal year, Versace would try to “achieve the ideal balance of fun and elegant assortment” and introduce “a wider offering of product to appeal to a broader base of luxury consumers.”
He said that expanding the product offering will help the brand re-engage with its aspirational customers.
Quiet luxury is on the way out
The quiet luxury trend, characterized by subtle pieces and logo-less designs, may have hurt the luxury industry, Bank of America analysts said in a January note.
The analysts wrote that the trend fueled the rise of dupes, which resulted in a weaker demand for luxury products.
Kering, the owner of Gucci, YSL, and Balenciaga, saw its stock fall more than 40% in 2024. And luxury giant LVMH saw its sales slide 3% in the third quarter of 2024, partially due to weakened consumer confidence in China.
The BofA analysts suggested that the luxury industry should “pivot back to creativity, fashion content, and newness” instead of pursuing simplicity.
“In order to reestablish stronger barriers to entry, we think the logo and fashion content is important,” the analysts added in the note.
Representatives for Capri did not respond to a request for comment from Business Insider, sent outside regular business hours.
