Dive Brief:
- Capri Holdings grappled with inventory delays for its Michael Kors brand in Q1 as congestion at certain ports in Asia spurred longer transit times, according to an Aug. 5 earnings call.
- In response, the company has been selectively using air freight to accelerate receipts where possible and working closely with its freight forwarders to get goods on faster vessels, CEO John Idol said.
- However, the “situation is temporary,” and the company expects inventory to normalize through Q2 and the back half of the year, CFO and COO Tyler Reddien told analysts.
Dive Insight:
Driven by port congestion and moves to reduce markdown levels, inventory at Capri Holdings — which is also the parent brand of Versace and Jimmy Choo — is at “historical lows,” Idol told analysts, including for clearance and markdown products.
Capri’s inventory declined 20% year over year to $624 million for the quarter ended June 27, Reddien said, fueled by a 25% inventory decline at Michael Kors. While the fashion company expects recovery in the long-term, inventory will continue facing headwinds, leading to high single-digit declines. Capri’s revised financial outlook including a $50 million revenue reduction due to lower-than-anticipated inventory levels.
“We are taking actions to accelerate inventory receipts, including increased use of air freight, and we expect inventory trends to normalize and build through the back half of the year to support our revenue growth,” Reddien said.
Capri is one of many fashion companies that have tapped air freight to move inventory, ensuring goods are moving quickly. However, the move can be temporary, as air cargo rates — which are poised to grow — are significantly more expensive than those for ocean shipping. Hugo Boss, for instance, earlier this year said it aims to eventually only use air freight as an exception versus a regular mode of transport.
