Michael Kors UK sees lower sales, plans price cuts and store closures but e-tail to grow

It may be part of the giant Capri Holdings that reports results quarterly but we rarely hear about Michael Kors’ specific UK performance so the filing of its accounts for the year to March 2024 is certainly illuminating.

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Turnover dropped to £70.85 million from £77.17 million and gross profit fell to £23 million from £28.6 million. Operating profit narrowed sharply to £4.96 million from £31.6 million but profit before tax increased to £61.18 million from £40.45 million. And net profit for the financial year rose to £66 million from £39.7 million. 

Of course, this doesn’t represent the full picture for the brand in the UK. The business  operates as a limited risk distributor for the parent brand on behalf of the MK group under the intercompany distribution agreement with Michael Kors (Switzerland) GmbH. As such, the company is primarily focused on sales and marketing activities while the commercial risks are borne by the Swiss company. Operating expenses are reimbursed based on a mark-up percentage indexed to net sales. Funding and liquidity needed for operating cost is also provided by the Swiss entity.

The UK firm’s drop in revenue came as the cost of living crisis impacted consumer enthusiasm for spending. The company also focused on store consolidation. It planned the shuttering of its concession in London’s Harvey Nichols as well as shops in Newcastle, Milton Keynes and Manchester to take place in the current financial year, as well as closing its Regent Street pop-up while waiting for its relocation to new nearby premises. Its new flagship is planned to open this summer.

As a result, it expects sales for the current year (FY25) to fall by 20%. Additionally, prices are expected to come down in the foreseeable future “in order to better meet consumers’ demand and counter competitors’ strategies on the market”.

The company said that at the same time as it’s consolidating its retail network it has been expanding its e-commerce business and both of these activities will continue in the future with a focus on driving profitability. 

The business continues to be a profitable one in Britain even though the company expects consumer spending to carry on being impacted by general macro economic conditions. 

The results came several months after fellow Capri holdings business Versace UK had filed its figures for the same period and it too saw turnover falling, in this case from £23.8 million to £19.2 million. Its profit before tax narrowed to just under £113,000 from almost £315,000 although the fall in net profit was smaller. The figure dropped to £382,397 from £398,777.