Jimmy Choo to be $1bn brand, launchpad for more Kors acquisitions
Those were the big takeaways from the Kors analyst conference call on Wednesday, but the company had plenty more to say about Choo that highlighted bold ambitions for the brand it has only owned for a few months.
First, that billion dollar claim. Kors CEO John Idol said the brand could achieve that status “over time” after its performance in its first two months of ownership smashed through the firm’s expectations.
Jimmy Choo revenue in the two months during the quarter that Kors owned it was $114.7 million. It clearly still has some way to go to reach $1 billion (£721m/€817m). After all, its last full year as a separate company saw revenue of £364 million and its last set of half-year results released in August added up to £201.6 million.
But Kors has already started increasing its investment in Jimmy Choo to support its strategic plans for the brand and the good experience so far has certainly boosted Kors’ multi-brand ambitions after it lost out on Kate Spade to rival Coach.
Idol said the Choo purchase “will enable us to drive long-term sales and earnings growth while also creating a platform for future acquisitions. We continue to look for potential luxury brand acquisitions to complement our existing portfolio.”
HEALTHY HOLIDAY SEASON
So what was it that worked so well for Choo in the Holiday season? The brand focused on disco as it key theme and emphasised glitter with top performers as a result being the Maine Bootie with a crystal-embellished heel, its Gabby pointy-toed flat with a knotted bow, and its Brandon stretch fabric ankle boot. “The strong reception to these styles reflects Jimmy Choo's leadership in fashion product innovation,” Idol said.
He added that the brand “continued to see great response to our Choo 24/7 collection with top performers including the Romy pointy-toe pump, Miami Trainer, and Youth biker boot.” In men’s, trainers led the performance, “reflecting the continued power of the fashion activewear trend.”
Idol added that the company was “encouraged by consumer response to our innovative footwear offerings” and that Choo’s performance in Asia and the Americas "showed particular success.”
Marketing was also key during the quarter and it launched a glamour-focused campaign, Shimmer in the Dark, which featured Cara Delevingne. That generated 159 million impressions on social media where Choo now has more than 13 million followers, a 30% increase over last year.
Idol said the company is “very excited about the long-term growth prospects for Jimmy Choo as we expand the brand's footprint globally and invest to further develop our women's accessories category and build the momentum in our men's business.”
As that statement suggests, retail expansion is vitally important to the brand. During the two months it spent in the Kors portfolio, the company opened one new Jimmy Choo store, but the brand also recently converted 17 locations previously managed by partners to company-operated stores. And it started a new joint venture agreement with Al Tayer in the Middle East.
That all suggests that the next quarter could be an even more interesting one for the brand and Idol promised to share more detail on the firm’s plans for Choo at the next conference call in three months’ time.
PROFIT AND INVESTMENT
Jimmy Choo is certainly putting a rocket under the overall Michael Kors performance. The company said that the group gross margin was 61.5%, an increase of 190 basis points versus the prior year, helped by a 30 basis point benefit from the inclusion of the higher gross margin Jimmy Choo business.
That said, Michael Kors may have raised its full-year guidance on the back of better-than-expected performance for both of its brands, but Jimmy Choo won’t boost earnings this year. It won’t dent them either (the company had expected it would) but the better-than-hoped-for performance will be offset by plenty of investment spend on the brand in Q4.
That investment will include spending on technology, growing the brand's global footprint, expanding the women's accessories category as mentioned, and building on momentum in the men's business. All of that is why the company is confident that it can increase revenues for Jimmy Choo to $1 billion one day.
Idol didn’t give any timeline for when this might happen but his upbeat stance and the better-than-expected performance suggests that it could happen sooner than he had hoped.
Idol added to this view when he said that the Jimmy Choo integration “went very, very smoothly between [the] two organisations,” also praising Choo CEO Pierre Denis and design chief Sandra Choi.
Those two executives and the senior Kors team have been “working very, very closely together” on accelerating existing store opening plans and also on that strategy for having a “very expansive” women's accessories business.
Idol said insights from Kors around the development of the accessories category will "add some value” to Choo. He added: “Our partners around the world, our wholesale partners, are very excited. Our own stores are very excited. So we're going to be able to move that needle pretty quickly.
Watch this space.
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