Capri Holdings – Michael Kors Domestic Challenges &
Asia Opportunity – 17 May 2021
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Specialist:
Title:
Sue McCarthy (SM)
Former VP, Consumer Marketing & Global CRM (Customer Relationship Management) at
Michael Kors Holdings Ltd
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Agenda:
1. Michael Kors (NYSE: CPRI) – domestic brand strength and consumer headwinds
2. Versace and Jimmy Choo portfolio update
3. Retail exposure risks and D2C strategy
4. High-end leather goods sales and margin outlook
Contents
Q: Could you give an overview of the luxury fashion and accessories industry? What are some main drivers
and who would you classify as the top players?
Q: Could you give an overview of the categories Capri’s brands operate in and some of the subsidiaries’
strengths?
Q: How has coronavirus impacted Capri and Michael Kors? How does that stack up against some players
that may have performed better during the pandemic? Why do you think Capri faced some of these
challenges?
Q: How have Capri and Coach’s distribution landscapes changed over the years? It seems that Capri
continues to rely on a wholesale approach and increasing its physical footprint.
Q: Why do you think Michael Kors is so reluctant to reduce its physical footprint or the wholesale
distribution strategy?
Q: How do you think Michael Kors is thinking strategically about the downfall of some major retailers and
department stores that carry its products? That was happening pre-pandemic. How do you think the
company is considering the long-term implications?
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Q: Wholesale brings in many sales for Michael Kors and Capri, but how would you assess some of the
differences in profitability and margin when comparing wholesale
Q: How much do you think pricing and promotional activity damage the Michael Kors brand when it is
trying to establish brand equity while competing with players such as Coach? Could you expand on the long-
term implications of the promotion-driven environment that Michael Kors has established?
Q: Even if Michael Kors decided to cut back on promotions, how much control does the company actually
have to implement that strategic shift, given its large wholesale presence? Do you think Michael Kors
possesses control over pricing within the department stores or is it at the mercy of wholesalers?
Q: Could you elaborate on the wholesaler-supplier relationship and how that’s changed over the years? Do
retailers such as Macy’s and other department stores have more control, or do some of the brands still have
most of the control, given Capri’s large exposure to Macy’s?
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Q: How has the D2C marketing landscape evolved given the significant push towards digital? Could you give
an overview of how you think Capri is targeting the consumer and whether it’s doing a good job, considering
the ROI of its marketing campaigns?
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Q: How is Capri keeping up with mature and younger consumers? How is it trying to stay relevant in these
demographics?
Q: How important is the overall shopping experience and controlling that experience? Nike has focused on
controlling the consumer experience at every step. What are your thoughts on Michael Kors’ D2C approach
and physical footprint, including enhancing the store to make it more attractive to the consumer?
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Q: How do you think Capri and Michael Kors have leveraged data to better understand the consumer? Coach
took a data-driven approach early on, which is proving to be fruitful. How would you assess data
implementation at Capri?
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Q: How do Versace and Jimmy Choo fit into Capri’s overall strategy? What are some challenges of growing
and maintaining these brands when the core brand is promotionally driven?
Q: Could you discuss Michael Kors’ brand identity and some of its long-term ambitions? How do you think
the company wants to be perceived? Is it a premium luxury or affordable luxury brand?
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Q: Do you think Michael Kors understands the challenge with younger consumers having no personal
connection to the brand, as you mentioned? How reactive is the company or Capri to recognising challenges
and addressing them, given Michael Kors’ distribution strategy issue?
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Q: Could you expand on how Michael Kors has considered the Asian market for growth? Many companies or
brands pursue global opportunities when they have struggled domestically. How has Michael Kors
capitalised on this opportunity, considering American brands tend to do very well overseas?
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Q: Why is there so much hesitancy around Capri’s ability to be agile and shift focus? You mentioned Coach is
quick to recognise the Asia opportunity and capitalise on it, and I believe Ralph Lauren, to an extent, could
also recognise some challenges and adjust accordingly. How does Capri’s leadership differ regarding decision
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making and agility compared to your experiences in previous roles at different companies?
Q: How would you assess Michael Kors’ innovation and new product roll-outs, and how does that compare
to competitors’? You touched on the brand’s product assortment and focusing on the right number of SKUs.11
Q: What do you think is Capri or Michael Kors’ appetite for acquiring some of the smaller, upcoming brands
and rolling them into the business or scaling them, especially considering their innovation and ability to get
closer to the younger consumer vs Capri and Michael Kors? Could the capabilities and success of smaller,
more innovative brands be incorporated into Capri?
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Capri Holdings – Michael Kors Domestic Challenges &
Asia Opportunity
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Capri Holdings – Michael Kors Domestic
Challenges & Asia Opportunity. I’m Nyree Hinton and I’ll be facilitating today’s Interview with Mrs Sue
McCarthy, former VP of Consumer Marketing and Global Customer Relationship Management at Michael
Kors.
Sue, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this interview.
SM: Agree.
NH: Could you start by giving a brief introduction to your background?
SM: I’ve spent 10-plus years in the retail industry, focusing on marketing, digital marketing, CRM and brand
marketing. Starting with six-plus years at Coach, spent time at Ralph Lauren and spent pretty much the last
two-plus years at Michael Kors, before leaving to relocate to the West Coast. During that time, I worked
regionally in terms of managing North America marketing and strategies. Many of the those roles were also
global as well at Michael Kors, and at Coach I managed global marketing and worked with many other regions
to expand.
[00:01:34]
Q: Could you give an overview of the luxury fashion and accessories industry? What are some main drivers
and who would you classify as the top players?
SM: Not surprisingly, in the last year, I would say that the industry, even though it has for a long time been
shifting to e-commerce focus, the organisations and the brands that are succeeding right now, and will
continue to succeed, were the ones that spent the last 2-3 years investing in technology, investing in
omnichannel, investing in the digital space. We have seen that companies that, in the past, have made e-
commerce maybe a secondary thought and been focused more on stores, have really been hurting in the last
year, unsurprisingly, with COVID. Even as we move forward, the trend that we’ve been seeing is that, yes, the
stores are open again, but the companies that have provided omni, customers are now used to a hybrid model.
In my past, I have seen that our customers shopped one channel or the other. Pre-COVID, we had our in-store
customers and we had our e-comm customers, and there was a very, very small overlap of people who did
both. That is completely changing now. We’re seeing that customers want a hybrid model, if not focused more
on e-comm, if they had been store shoppers. That’s the overall environment right now. Yes, product is
important, but I would say the experience and the ease is a lot different, and we don’t see that changing. We
don’t see stores closing and going away, but we see more customers wanting a hybrid model. Whether that
means more home delivery, whether that means kerb-side pick up or just a quick pick-up in-store, there’s
definitely a shift. When you look at the retail players in this space, it’s the players that have really set
themselves up for that, pre-COVID.
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[00:03:57]
Q: Could you give an overview of the categories Capri’s brands operate in and some of the subsidiaries’
strengths?
SM: I will focus a little more on Michael Kors, for obvious reasons, as my experience is quite deep in the
Michael Kors space, but Michael Kors is the biggest part of Capri. I would say that, in the marketplace, they
have been making strides in market share. That comes from a few things. Granted, I’m saying that now
because when I joined, over two years ago, there was definitely a struggle to maintain relevancy in the fashion
space, in that accessible, luxury space. There are a lot of competitors in that space. Michael Kors, what they
have going for them is brand and brand recognition. They have spent a lot of time focused on product, more
so, doubling down on the right product offerings, and actually, seeing it over the last two years, you can see
that even almost, what’s the word I should be using, perhaps curating their offerings, going from a massive
amount of SKUs to still a large amount of SKUs, because it’s a very large brand, but a smaller amount of SKUs
than in the past. You see where they’re marketing and see where they’re advertising, it’s definitely doubling
down on handbags, which has always been a strength, growing the shoe category, growing the outerwear
category. I know Capri has talked about this in the past, I don’t know whether the market has really seen this
yet or not, but also, publicly, they’ve talked about growing the men’s business. That’s where Michael Kors is
potentially going to win, by more focusing on those categories and growing those categories. I would say that,
when you think about how they’ve run the business over the last two years, even pre-COVID, it’s investing in
digital, it’s looking at omni, it’s closing some of the lesser performing stores, and so, to me, the theme there is
focus, whether it be product focus or distribution focus.
[00:06:47]
Q: How has coronavirus impacted Capri and Michael Kors? How does that stack up against some players that
may have performed better during the pandemic? Why do you think Capri faced some of these challenges?
SM: I think that the biggest challenge with Capri, and truthfully, I guess, any other organisation, Capri,
especially Michael Kors, relies very heavily on the wholesale channel, the Macy’s, the Bloomingdale’s of the
world. Those wholesale channels, from a Michael Kors perspective, a lot of that revenue is generated in-store
vs Macy’s.com. Certainly, Macy’s.com sells Michael Kors products, etc, but a lot of wholesale business from
Michael Kors, and some competitors, for that matter, focused on the in-store sales. With COVID, that proves
very challenging. The wholesale business, when it’s a big piece of your business, and it’s an in-store piece, that
becomes a huge challenge for the business when there is not that channel. Yes, I know, as somebody who has
worked at Michael Kors during COVID, the consumer shift, let’s say at Macy’s, Macy’s is the biggest wholesale
partner for many brands, including Michael Kors, there was a consumer shift to maybe shop more online, but
it did not make up for the loss of in-store sales. That was the biggest issue. When you look at some other
competitors, let’s say Coach, for instance, Coach, over the last five years, have spent pulling back their reliance
upon wholesale channels, so they’re slightly better poised in the world of COVID because they had built a
strong e-comm. They had built a massively strong Coachoutlet.com business vs relying upon their wholesale
partners. When you look at that, they were better poised when actual physical retail shut down than a Michael
Kors was.
[00:09:09]
Q: How have Capri and Coach’s distribution landscapes changed over the years? It seems that Capri continues
to rely on a wholesale approach and increasing its physical footprint.
SM: So that is a very marked difference between when we think of Capri and Coach. Coach, I’m going back six
years-plus, I was certainly there for this, there was a marked shift to increased DTC and decreased reliance
upon third-party channels, and that’s obviously wholesale. Building digital, I think both brands have made
strong decisions about store footprints. I think that Coach was probably more aggressive a few years ago about
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really tightening up their DTC fleet and definitely getting rid of the lower-performing stores, whether that be
outlet or full price. It has been a slower roll for Michael Kors. Capri, Michael Kors, they have not decreased
their reliance upon wholesale partners, in fact, they’ve increased it, if anything, expanding with some off-price
partners that they had maybe two years ago. This is even pre-COVID, expanding with off-price, expanding the
footprint, expanding with dot-com partners, like a Zappos, a Shopbop, etc. They’ve actually increased their
reliance on third party and been slower, I guess, is the word I would say, to look at closing their DTC stores
that are underperforming. It’s happening. It’s happening several years after Coach made those decisions, so
right now, they’re in a bit of a trickier position. It also took them a little longer to, I would say, focus
technology and what have you on the experience and on the e-comm experience. The final part of that is truly
just outlet business, which is distribution. Michael Kors is fully reliant upon outlet stores. Whereas Coach has
exploded their outlet business by their outlet website, Michael Kors does not offer the same online offering
and that sets a marked difference in their distribution channel.
[00:12:20]
Q: Why do you think Michael Kors is so reluctant to reduce its physical footprint or the wholesale distribution
strategy?
SM: It’s a great question. From my opinion perspective, for Michael Kors, wholesale seems like a bit of a drug
that hasn’t been turned off. If I think about my experience years ago at Coach, Coach really put together a full
strategy to slowly exit, not completely, but reduce the wholesale business. Those strategies are building DTC
capabilities. Michael Kors hasn’t looked at the full strategy, in my opinion. It feels like that, because if they had
they could slowly… Yes, it takes time. At Coach, it was a 2-3 year plan that we undertook. Michael Kors is very
reliant upon the percentage of business from wholesale and is very reluctant, and I think does not think they
could make up for it elsewhere, mostly wholesale. Granted, I think it took too long. I think that they have been
more strategic about closing their own DTC stores and shifting those consumers either to another close store
or online, that has been a marked strategy, but wholesale is still going to be an issue with them on the go-
forward. They need to figure out how to make up for that, even though it’s a decreasing business, absolutely,
wholesale is a decreasing business, it’s still a large percentage of the Michael Kors business, and I just feel like
strategically they haven’t figured out how to make up for that like Coach has.
[00:14:41]
Q: How do you think Michael Kors is thinking strategically about the downfall of some major retailers and
department stores that carry its products? That was happening pre-pandemic. How do you think the company
is considering the long-term implications?
SM: To me, this was always a big lingering question when I worked there, because you saw it, you saw it YoY.
I’ll use Macy’s as an example. This is public knowledge. Macy’s has been declining, closing stores. Their online
business is fairly healthy, but if the retailer is reliant upon Macy’s, and Michael Kors, 100%, Macy’s is their
biggest account, absolutely, YoY we saw a decrease. It was more about, I think, that I never saw Michael Kors
leadership saying, “What can we do? What are other distribution channels that can make up for this a little
bit?” For instance, back to the off-price conversation, they expanded wholesale partnerships with off-price
channels, like a Famous Footwear, like a DSW, etc, and those were newer partnerships. When I was there, it
was more about, “How do we drive more Macy’s business?” and to me, that is a very slippery slope because if
Macy’s is declining in foot traffic, in online traffic, etc, there is only so much you can do to build your brand
within that space. To be honest, I never really saw what the end game, I guess I would say, would be, and that’s
a huge challenge. As somebody who managed wholesale marketing for the brand, for Capri, I started with a
fairly large team managing wholesale marketing, I ended up with, over two years, a smaller team because there
just wasn’t the need for a big team anymore, so even internally, with staffing, there are certain clear signs that
the business is going to have to focus outside of wholesale.
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[00:17:29]
Q: Wholesale brings in many sales for Michael Kors and Capri, but how would you assess some of the
differences in profitability and margin when comparing wholesale to the D2C approach and e-commerce?
SM: Not being super close to that, I will say that my understanding is that it’s a healthy margin, and that’s
another thing it holds, it’s a healthy margin. Wholesale also, depending upon the wholesale partner, there was
a lot of full-price sell-through, which obviously helps margin immensely. Maybe not Macy’s, Macy’s was a mix,
but other wholesale partners, our full-price sell-through was very healthy. I don’t know without saying too
much about the online business, but Michael Kors as a brand, when you think about DTC, is very promotional.
That’s not surprising. It’s a sale, it’s the year-end sale, it’s the weekend sale, so a lot of the sell-through on dot
com, mostly on dot com, to be honest, tends to be promotional, and thus not as margin rich as that full price
sell-through at wholesale. That’s what I can say about the margin, because I do think that’s part of the drug of
wholesale, is that the margin is strong.
[00:19:25]
Q: How much do you think pricing and promotional activity damage the Michael Kors brand when it is trying
to establish brand equity while competing with players such as Coach? Could you expand on the long-term
implications of the promotion-driven environment that Michael Kors has established?
SM: Absolutely, it’s a huge challenge. It’s something that unless you’re willing to put up with a bit of, I would
say, pain for a couple of years, you continue. I will contrast it to what Coach did several years ago. Several
years ago, Coach was in the same exact space. There were promotions all the time, there were coupons all the
time, and it does degradate the brand, because if you have a regular consumer, they know that you’re not going
to sell out of this black bag, they’re just going to wait for it to go on sale in four or five weeks. That’s what was
happening at Coach. Coach took a very specific strategy, and they knew it would take a year or two of pain to
exit that constant promotional cadence, and instead what Coach took, and still to this day you see it, they
basically do two annual sales, semi-annual sales, with maybe four or five, quote, promotional periods for a
Mother’s Day or a Black Friday or something like that. That is not always on promotion. Granted, they have
Coach outlets, which is a lower-price solution, but on their Coach.com website and in stores, they have
decreased the number of promotional days dramatically. They went through a couple of years of decreasing
profitability or revenue because of that.
Michael Kors has not done that. You’re going to have a couple of years of re-training the customer, I guess I
would say, that you are now more of a luxury, full-price brand. Coach, also, if you look at Coach, they’ve built
up scarcity potentially on some things, by doing collaborations. They’ve made the customer understand that, if
they want the premium stuff, they’re probably going to have to pay full price or wait it out and hope it’s still in
stock. Michael Kors has not done that. As much as Michael Kors wants to, any brand, anyone in the industry
that I talk to that is a promotional brand, would love to shut that off, but they have to take marked steps to do
that and understand and rebuild the brand as a full-price brand. Michael Kors, as far as I understand and
everything, when I was there, and now it’s what I’m reading about them, really still has not taken steps to turn
off the promotional spigot. They have worked on brand-building campaigns. The issue is, as beautiful and as
high-end as marketing campaigns look, there are many days out of the year where you go on the Michael Kors
website and it’s talking about a sale on the home page. I wouldn’t call it confusing for the customer, it’s just the
customer, the Michael Kors customer, is very trained to shop on sale. Unless you’re going to actively pull back
and go through a couple of years of lower full-price sales, you’re not going to change that.
[00:23:46]
Q: Even if Michael Kors decided to cut back on promotions, how much control does the company actually
have to implement that strategic shift, given its large wholesale presence? Do you think Michael Kors
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possesses control over pricing within the department stores or is it at the mercy of wholesalers?
SM: I’m going to speak for Michael Kors, but to be honest, this is very industry-wide. Most large brands work
with their wholesalers on a pricing or a discount cadence, I will say. In the case of Michael Kors, and again,
most brands, Ralph, etc, Macy’s would never mark things down before a Michael Kors does. It is like, “This is
our cadence. On the 15th, we mark down these SKUs,” and then Macy’s will do the same. They do have an
agreement. I hear what you’re saying. It’s not as if Michael Kors, in their stores, online, would have these
hundred products full price and Macy’s would have them discounted at 40%. That is not the issue. It is
changing the overall markdown cadence and strategy for the brand, which would then trickle down to the
wholesale partners and they would be aligned on that. I’m not saying that wholesale partners would like that
change. Macy’s themselves are a very promotional wholesaler. If a brand like Michael Kors is saying, “I know
we used to tell you you could mark down after six weeks, but now you cannot mark down until 12 weeks,”
that’s certainly a relationship problem, but they at least wouldn’t be competing on price because it would be
marked down at the same time.
[00:26:06]
Q: Could you elaborate on the wholesaler-supplier relationship and how that’s changed over the years? Do
retailers such as Macy’s and other department stores have more control, or do some of the brands still have
most of the control, given Capri’s large exposure to Macy’s?
SM: From a pricing perspective, the brands still have a lot of control, but again, these are years-long wholesale
agreements that have been in place that haven’t really changed. If I think about any brand I’ve worked for, the
brands are still in control when it comes to pricing. There is a but because with most wholesale relationships
you’re in control for a certain amount of time, the brand is in control for a certain amount of time. What I
mean by that is you might have an agreement with Macy’s on when a first markdown might be and even when
a second markdown might be. After that point, Macy’s takes over. Again, it’s a different level and percentage
for any brand, but let’s say the cut-off is 40%, once it’s down to 40% on your site and Macy’s site, after a
certain amount of time, all bets are off. Macy’s can put that on clearance later if they want. There is a point
once it gets to a certain percentage that you might be competing with your wholesalers. You’re probably going
to react and you’re going to look and you’re going to see what they’re doing, but there certainly have been
instances in the industry where once that threshold has been reached, Macy’s might just put you in clearance,
and then you’re at 70% at Macy’s. There is a strong amount of control, especially when product is new, but it
does deteriorate once you get passed a certain markdown point.
[00:28:45]
Q: How has the D2C marketing landscape evolved given the significant push towards digital? Could you give
an overview of how you think Capri is targeting the consumer and whether it’s doing a good job, considering
the ROI of its marketing campaigns?
SM: I would say that Capri has done an amazing job with digital. Not necessarily with the website, I think
that’s evolving. I think that they have, over the last year-plus, started really investing in the actual dot-com
experience, etc. From a digital marketing perspective, and honestly, marketing is digital at this point, I would
say that any brand in this space is spending considerably more on digital than traditional marketing which is
not surprising. Capri in general has done an amazing job with digital marketing. When I joined, actually, there
was a marked effort to increase the return on ad spend, because it wasn’t that great, to be honest. I would say
this is 2018. It wasn’t that great. It was positive, but it wasn’t that great compared to other, they knew their
competitors. They’ve invested in spending on Google, on social, they’ve invested on CRM technology that helps
targeting of digital ads. Invested in the right digital agency to manage the business, along with internal teams.
I would say from a digital… And this is again, Michael Kors. Versace I wouldn’t say is the same. Jimmy Choo is
certainly a smaller investment, but also has put more effort into digital marketing, again, looking for the right
agencies, investing in search and social. I would say that in the digital marketing space, Capri has done a great
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job, some ways, I think, even more so than Coach, but I think that they’ve spent really the last two years
making that a huge focus and pulling back on traditional spend, like print. Three or four years ago, Michael
Kors was a big spender in print advertising, not so much anymore, not surprisingly. Maybe there is still
outdoor investment, etc, but there has been really a great shift towards digital, which has very much positively
impacted the dot-com business.
[00:31:59]
Q: How is Capri keeping up with mature and younger consumers? How is it trying to stay relevant in these
demographics?
SM: I’ll start with the mature consumer because that is the Michael Kors core customer. It’s a woman who has
shopped at Michael Kors for years. The good news about Michael Kors is that they do have a lot of very loyal
customers that have shopped with them for years, that have relationships with the sales associates in-store
and that have really strong lifetime values with the brand. That is an older, mature, 40-plus consumer, for
sure. This is definitely public knowledge, but two-plus years ago, Michael Kors changed their advertising
strategy to include the Hadids, there’s Bella in the ads, there’s Gigi in fragrance, which to them was a strategy
to attract a younger consumer. I would say that, to this day, the jury is out on whether that strategy worked.
Yes, they have seen, even if you just go to a store now, you see that there are younger consumers shopping
than there might have been two years ago. I don’t know if it’s related to the Hadid sisters. I do think that the
other thing that might be attracting a younger consumer is the product. Michael Kors introduced a lot less,
what I would call, mature bags such as satchels, and there are a lot of cross-bodies in-store, a lot of hands-free,
just smaller bags, younger bags, cooler bags. I also think that has something to do with it, because the product
offering has shifted a bit as well, so you see that in the consumer in-store now.
[00:34:29]
Q: How important is the overall shopping experience and controlling that experience? Nike has focused on
controlling the consumer experience at every step. What are your thoughts on Michael Kors’ D2C approach
and physical footprint, including enhancing the store to make it more attractive to the consumer?
SM: A couple of things. One is certainly physical and experience in the way the store looks and feels, and the
second would be the really true customer service. The first part, I think that Michael Kors has done a good job
of freshening up the store experience. It feels warmer than it used to. It feels a bit cooler in-store. There have
been a lot of improvements in stores. A lot of the stores that felt outdated, truthfully, were stores that were way
under-performing stores anyway, so probably are closed by now. The actual physical experience, it has been
elevated over the last couple of years. Customer service, I would say that should be an evolving piece for them.
Some stores are amazing. Some stores are a little lacking. I would say that they don’t have as strong a customer
experience and selling ceremony as a Coach does, for instance. I would say the concept of clienteling and
product storytelling is in the evolution stages at Michael Kors. Yes, I think there is probably good traffic in
stores, they probably, in my opinion, could improve conversion in stores through a stronger customer service
experience.
[00:37:02]
Q: How do you think Capri and Michael Kors have leveraged data to better understand the consumer? Coach
took a data-driven approach early on, which is proving to be fruitful. How would you assess data
implementation at Capri?
SM: I will say at Capri, and I’ll speak for Michael Kors even though the data function is probably going to be, I
would imagine, I would hope, that they’re going to make it as a shared service, because the data and analytics
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capabilities and team at Michael Kors, I will tell you, are, hands down, the best I’ve ever worked with. I joined
Michael Kors in 2018. Michael Kors spent at least the year, if not the two years, before I joined, building that
capability, building a strong analytics team, building the right technology behind the data. By the time I
joined, there was a very fully formed and functioning analytics and data team that absolutely was instrumental
in the proper digital marketing targeting. Coach probably did it first, they probably really built out that first,
but Michael Kors is there now. I can say from a digital marketing, from a CRM perspective, I never wanted for
anything in terms of data or support or ability to properly customer target, and I would guess that they will
take that strong capability and expand that to the Jimmy Choo and Versace worlds.
[00:39:23]
Q: How do Versace and Jimmy Choo fit into Capri’s overall strategy? What are some challenges of growing
and maintaining these brands when the core brand is promotionally driven?
SM: That’s probably why I know less about those brands, because they’re separate. They’re definitely
separate, and probably, to your point, smartly so, to a degree, from a brand perspective. Yes, Michael Kors
does have a luxury line. We do have Collection. We did have Collection, very high-end, very expensive, like a
Versace, but that’s a very small piece of Michael Kors’ business. The rest is Michael by Michael Kors, and it is
very promotional, as noted. The Versace and Jimmy Choo brands are very much separate entities. Yes, they’re
part of the family, but even as I was just saying about data, even data… Unlike Tapestry. Tapestry has clearly
brought in a lot of shared services across their brand. Granted, Tapestry brands are way more similar in terms
of price point, customer, etc. Capri has not done that. There are shared services at the organisation like legal,
etc, but nothing from a marketing and consumer perspective, which, to me, does make sense, if I think about
it, because it is not the same consumer. The Versace consumer is definitely not the consumer walking into the
Michael Kors store, maybe the Michael Kors Collection store, but I think there are only four or five of those
left. It does make sense that they’re really run as separate entities. I assume digital will become a shared
service at some point, but they’re still very separate brands in separate locations and separate leadership,
which, again, I’m not surprised given that at least Jimmy Choo and Versace are very different brands vs
Michael Kors.
[00:41:52]
Q: Could you discuss Michael Kors’ brand identity and some of its long-term ambitions? How do you think the
company wants to be perceived? Is it a premium luxury or affordable luxury brand?
SM: Definitely still in the accessible luxury space. You can’t avoid it. Honestly, when you look at the pricing of
95% of the products, it’s the accessible luxury space, it just is. Their competitors are still the Coaches, the Kate
Spades of the world, for sure, a little bit Tory Burch, but in terms of pricing, that’s where they sit. In terms of
brand, it’s interesting. It’s back to the conversation we were having earlier about a mature audience vs a
younger audience. The mature audience grew up with Michael Kors, the man, knows him. Honestly, if you go
to a Michael Kors personal experience that he’s done in the past at a Neimans or one of the Collection stores,
he has a following of older women who know him and became fashion fans of his as a personality. Plus, he’s
spent a lot of time on Project Runway. Women of a certain age, 40-plus, I would say, know him and know the
man and that actually adds a lot of brand, how should I say this, certainly recognition, but brand favourability
to the brand. The issue with Michael Kors the man, I hate to say it that way, because he’s lovely, would be that
the younger generation doesn’t really know him. They certainly know the brand Michael Kors, the store, they
know the brand, but they don’t really have this connection to the man leading the brand. Even Ralph Lauren,
Ralph Lauren, yes, he’s an 80-plus-year-old man, but there is still a personal, potentially, connection, even in
the younger generation, that understands that Ralph Lauren is this icon of a man. Michael Kors actually
doesn’t have that with a younger audience. That’s actually a huge brand challenge, I would say. There is just
not that personal connection. Granted, Coach is different. Coach, people who are in industry know who the
designers were, but nobody has a personal connection. People love Coach, but they don’t have a personal
connection to Stuart Vevers. Nobody bought Coach because of Reed Krakoff. Coach is a brand that built the
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brand. Michael Kors is a little trickier because they built the brand around a man and now a younger
generation doesn’t know who this man is. In my opinion, as a marketer, that’s a huge brand challenge.
[00:45:13]
Q: Do you think Michael Kors understands the challenge with younger consumers having no personal
connection to the brand, as you mentioned? How reactive is the company or Capri to recognising challenges
and addressing them, given Michael Kors’ distribution strategy issue?
SM: That’s a great question. That particular challenge, I think that a lot of people think about, but I’ve never
seen it necessarily addressed. It’s not as if Michael is out there and doing cool TV shows and they’re using him
as a name. If they’ve acknowledged it’s a problem, certainly nothing is being done about it. Other than Michael
during the pandemic, actually, was a little more active in their social content, other than that, they didn’t put
him front and centre so people fall in love with him. He has an amazing personality, that’s why an older
generation was attracted to him. To me, if they see it’s an issue, there certainly hasn’t been a change in brand
strategy to address that. I would say that, in general, Michael Kors isn’t the most risk-taking brand. You can
see that. That’s not surprising. If you look at the ads in the last two-plus years, they’re pretty much all the
same. I hate to say that, but they are. They look the same, still using Bella Hadid, it’s not some big shift, it
looks like it looks. That’s the thing. There might be internal discussions about what the challenges are, but
Michael Kors is not a risk-taking brand, so it’s a slow roll, I think, to make any major changes, either from a
brand perspective or even a technology perspective. I will say that I joined two-and-a-half years ago and
everyone acknowledged that we needed to upgrade our website and technology and what have you. That’s
happening now, which is great. I know that they’ve talked about this, about how they’re investing in
technology, but that’s two years after it was acknowledged. It is a slower roll. It doesn’t mean that they won’t
overcome some of these challenges, but they’re just not as risk-takers as maybe some other up-and-coming, I
would say, brands are that might take more market share from them.
[00:48:35]
Q: Could you expand on how Michael Kors has considered the Asian market for growth? Many companies or
brands pursue global opportunities when they have struggled domestically. How has Michael Kors capitalised
on this opportunity, considering American brands tend to do very well overseas?
SM: A couple of things. Michael Kors, and I think they’ve been very public about this, is now focused on
growing their Asia footprint, which is great. I think there’s a lot of opportunity for them there, and I think they
will see amazing growth there. I will say that, again, to the slow on the uptake point, they’re several years
behind Coach in that commitment. Coach went in several years ago and said, “We’re going to make a
commitment to Asia,” and has done an amazing job of building the brand there, whereas I am surprised that
Michael Kors didn’t do this sooner and didn’t see the Asia opportunity sooner. I do think that they have been
more focused on growing Europe. Again, Europe is very much a wholesale model for Michael Kors. I am
personally surprised that Asia is more of a focus now for them vs five years ago. I do think that’s a little bit of a
challenge, because other brands have been doing a great job in Asia over the last five years. I remember
working at Coach five years ago, and yes, opening stores, but more than that, building a massive social
presence in Japan and in China, and Michael Kors is still not there and they’re doing that now. I do foresee a
lot of success with Michael Kors in the Asian markets. The issue is that it’s going to take time, just like with
Coach or any other brand, Ralph Lauren, it takes time to build a brand there, and the brand recognition is not
as strong as it is in the US. It’s great that they’re on this strategic path to grow in Asia, but it will take time and
they’re several years behind their competitors there.
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[00:51:25]
Q: Why is there so much hesitancy around Capri’s ability to be agile and shift focus? You mentioned Coach is
quick to recognise the Asia opportunity and capitalise on it, and I believe Ralph Lauren, to an extent, could
also recognise some challenges and adjust accordingly. How does Capri’s leadership differ regarding decision
making and agility compared to your experiences in previous roles at different companies?
SM: I think it’s a really smart and great question. I’m not 100% sure why that is. Granted, I’m not saying that
Coach is very nimble. All of these companies are not as nimble. I think that Coach acknowledged there was a
turning point several years ago, where business was not great, and they took risks and changed strategy,
whether it be wholesale or Asia expansion or reducing promotional periods. It was, “This is how you’re going
to turn the business around.” It was one big strategy with many different pieces. It was one big strategy. I
guess what I see at Michael Kors is it’s more like they almost think it’s success by a thousand paper cuts, which
I know doesn’t make sense, but it’s making little moves, but not taking a step back, and not that this is bad, but
putting together a full strategy about what the future of the business looks like. There might be some decisions
made, like “We’re going to expand this,” or, “We’re going to do this technology-wise,” it’s not part of a bigger,
these pieces just happen. To me, what I can say from especially now being an outsider, it’s almost like there are
piecemeal strategies happening to fix the holes in certain buckets, but there’s not one big strategic
undertaking. That’s actually really interesting too. I’ve always wondered that at Michael Kors.
At Coach, we had a whole business strategy team, that pulled together, “Here’s what we’re doing, and here’s
what we’re learning, and here’s how we’re going to…” and actually that kind of capability doesn’t even exist at
Michael Kors. Yes, there are amazing analytics teams and data, but there’s not a business strategy team that’s
saying, “Here’s a competitive environment, here’s how we’re going to change our promotional cadence.” In
many ways, in my two years there, I felt like that was kind of a miss on their part to not have that capability.
[00:54:55]
Q: How would you assess Michael Kors’ innovation and new product roll-outs, and how does that compare to
competitors’? You touched on the brand’s product assortment and focusing on the right number of SKUs.
SM: I definitely wouldn’t use the word innovation with Michael Kors when it comes to product, and I hate to
say that, but they don’t feel innovative. I do believe that in the last couple of years they have listened more so
to consumer preference and made decisions based upon that, like I was saying earlier, a lot of smaller bags,
cross-body, more functional. Listening to the consumer, when they realised that they had a spark of success
with sneakers, they expanded the sneaker line with great success. I definitely think that they’re more using
consumer input and consumer trends to make those product decisions. I hesitate to say innovation because it
doesn’t feel innovative per se. I hate to use the collaboration example again, but Coach comes across as a more
innovative company because they’ve built collaborations with other brands. Their Disney collaboration, which
has been going on for years at this point, on and off, people see that as more innovation, and you always win
when you partner with Disney. Partnering with artists on certain limited edition bags. Again, I’m using Coach,
but they’ve done a really good job of that. Same as Ralph Lauren. Ralph Lauren has introduced eco-friendly
clothing and some tech advantage clothing, so they feel more innovative and special, and it’s also why you sell
through product at full price, when it feels innovative. Michael Kors hasn’t gotten there yet. Michael Kors
never collaborates, for whatever reason. I don’t think Michael likes to, that’s my theory, I have no idea. There’s
no collaboration. I do think that they’ve done a better job of better SKU count and better product categories
for the consumer, but I don’t think any customer would think of them as innovative.
[00:57:32]
Q: What do you think is Capri or Michael Kors’ appetite for acquiring some of the smaller, upcoming brands
and rolling them into the business or scaling them, especially considering their innovation and ability to get
closer to the younger consumer vs Capri and Michael Kors? Could the capabilities and success of smaller,
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more innovative brands be incorporated into Capri?
SM: I always thought that was what we should be doing. I will say that I have a hunch that that is not on the
agenda any time soon. I guess Versace happened two-and-half years ago, I think that was, for a while, their
last stop on the acquisition train. That doesn’t mean down the road, I just can’t imagine they’re set up for that
right now. I also think that leadership at Capri, this is, again, just my opinion, but I do think they’re a bit more
interested in heritage brands vs cool, up-and-coming brands. I feel like that was never talked about. Even
when you think about when we looked at other brands in the marketplace and had discussions internally, it
was never cool, up-and-coming brands, it was always the heritage brands. Anything from a Gucci to a Coach to
a Prada, internally always looked to brands like that for what they were doing vs newer, cooler brands that
were very DTC-focused. Never say never, but from what I see and, in my opinion, I don’t think that’s on their
radar right now.
[01:00:03]
NH: Let me close by saying thank you, Sue, for your time, it was a great Interview with lots of value-add.
Thank you, clients, for joining Third Bridge Forum’s Interview today. If you’d like to speak with Sue in a
private call or meeting, please let your relationship manager know. Goodbye.
SM: Thank you.
Transcription ends at 01:00:18 of the recorded material
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