Versace Sales Decline Attributed to Brand Strategy Missteps
Versace's sales have declined 15% due to strategy errors, including a focus on quiet luxury and fewer lower-priced items. CEO John Idol announced plans to balance product offerings for better engagement.
Capri Holdings, the parent company of Versace, has reported a significant decline in the brand's sales, with a 15% dip in revenue compared to the previous year. The Italian luxury brand earned $193 million in the quarter that ended on December 28.
The earnings report revealed a 21% decrease in sales in the Americas and an 11% drop in Asia. Capri CEO John Idol discussed the reasons behind these declines in the company's earnings call on Wednesday.
Idol mentioned two primary factors: Versace's excessive focus on the quiet luxury trend and a reduction in lower-priced product offerings. He stated that while the brand was repositioning by emphasizing luxury and craftsmanship, this shift led to the removal of too many distinctive Versace statement items.
According to Idol, the change in strategy did resonate with "very important customers," but it also negatively impacted sales due to the reduction of entry-level priced goods. He acknowledged that fewer markdowns in Versace stores, part of the brand's elevation strategy, had a short-term adverse effect on revenue.
To address these issues, Idol announced plans for the next fiscal year, which include balancing the product assortment between fun and elegance while expanding offerings to attract a broader range of luxury consumers. This strategy aims to reconnect with aspirational customers.
Bank of America analysts have observed that the quiet luxury trend, defined by understated pieces and the absence of logos, has affected demand for luxury products. They highlighted that the luxury industry might need to return to a focus on creativity and fashion content instead of pursuing a simplistic approach.
Notably, competitors like Kering and LVMH have also experienced sales declines, indicating a broader challenge within the luxury sector, particularly influenced by shifting consumer confidence, especially in China.
