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Why some luxury brands are no longer interested in discounts

The owner of Michael Kors and Jimmy Choo says prices at both brands will soon increase as it eschews major promotions

Luxury companies are benefiting as consumers continue to splurge after squirreling away savings during the pandemic.
Luxury companies are benefiting as consumers continue to splurge after squirreling away savings during the pandemic. (REUTERS)

The owner of Michael Kors and Jimmy Choo says prices at both brands will increase during the coming months as the company eschews the major discounts that have dinged revenue in the past.

“We’re raising prices on Michael Kors,” said John D. Idol, chief executive officer of Capri Holdings Ltd., which also owns Versace. “We’re going to raise prices again for spring season next year, prices are going to go up considerably. And also at Jimmy Choo.”

The topic is a sensitive one for luxury companies: Kors and rival brands like Coach and Kate Spade are trying to raise the prices of their handbags and accessories as they wean themselves off discounts and promotions, which boosted volume but eroded revenue and profitability in past years. Selling merchandise at full price is seen as the hallmark of a high-end brand.

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"Michael Kors over the last several years has been working to re-elevate their brand and retrain their customers that they don’t need to be everything to everyone,” said Simeon Siegel, managing director at BMO Capital Markets. “That’s been the turning point for this brand.”

Capri shares surged as much as 16%, the most since November, last Friday after the company boosted its revenue forecast and posted sales that exceeded analysts’ projections, reports Bloomberg.

Idol told analysts during the call that Capri had no plans for major discounts.

“I don’t care if our competitors do it -- it doesn’t matter. We don’t have the inventory to do it. So it won’t happen,” he said. “And not only that -- we just don’t want to do it anymore.”

Capri reported net inventory of $760 million as of June 26, a 20% decrease compared to the prior year.

Luxury companies are benefiting as consumers continue to splurge after squirreling away savings during the pandemic.

The company's European peers Louis Vuitton-owner LVMH and Kering have also reported a rebound. LVMH posted record profitability and revenue at its Fendi, Loewe and Celine brands, while Kering said Yves Saint Laurent had reached a critical scale with sales bouncing back in all regions, according to a Reuters report.

Still, Idol was broadly cautious given the uncertainty about new covid-19 infections.

“The delta variant is spreading, and so I think that will probably slow down some of our expectations around rebounding as quickly as we would have liked to have seen,” he said. “But on the other hand, we see North America going much quicker than we’ve seen. We see strength in China.”


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