Versace Owner Sees Supply-Chain Disruptions Lasting Six Months

(Bloomberg) -- Capri Holdings Ltd., the owner of the Michael Kors and Versace brands, expects to have trouble meeting robust demand for luxury accessories for at least half a year -- the latest example of how companies' supply-chain problems are dragging on.

“It's going to take us the better part of six months to really get ourselves fully caught up and in a good position that we can support our own stores, as well as our wholesale partners,” John D. Idol, Capri's chief executive officer, told analysts on Wednesday. “Many of the ports are quite backed up.”

Company executives expect year-over-year supply-chain costs will be highest during its fiscal first quarter, which falls in early summer, and to normalize in the second half of this year.

The delayed shipments of handbags and other accessories meant that Capri's brands didn't always have enough products on hand for shoppers that are eager to splurge. Those shortages were particularly acute at Michael Kors during the holiday shopping season, Idol said. The brand has struggled more than Versace and Jimmy Choo -- also owned by Capri -- to surpass its pre-pandemic levels of revenue.

To ensure that Michael Kors and the other brands have enough product on hand to meet what Idol said is “healthy” demand around the world, Capri will stock up on some of its core products.

“Inventory growth is expected to outpace sales growth for the next 12 months,” Capri Chief Financial Officer Thomas Edwards told analysts.

Despite the delays, Capri's three brands still beat analysts' estimates for revenue in the company's fiscal third quarter. Capri also raised its outlook for the full fiscal year and gave an upbeat estimate for sales in fiscal 2023.

Capri's global operations, focus on new designs and increased offering of accessories has let it raise prices to offset inflation, Bloomberg Intelligence analyst Deborah Aitken said. At the same time, “focused e-commerce and marketing campaigns are combining with store overhauls to drive stronger, profitable growth,” she said.