(Bloomberg) – Fashion senior director John Idol Versace tilted too much on the gorgeous design, aiming to fix it by dialing out the price and then raise the price.
When his company Capri Holdings Ltd. acquired the fashion house in 2018, he said his strategy will double its revenue over the next decade. Six years later, this vision has disappeared. He sold Prada Spa for $1.38 billion, with a loss of about $700 million, and sales growth dropped significantly.
Capri expects Versace to report revenue for the current fiscal year ending in March to be approximately $813 million. That’s down from the $843 million sales reported in fiscal 2020, Capri’s first year of operating the brand.
Versace’s future is now Prada, a delicate company that has recently caused a slowdown in luxury spending. Prada’s revenue also includes the MIU MIU brand, which grew 17% in 2024. By contrast, analysts surveyed by Bloomberg expect Versace to report sales drops about March’s fiscal year ending the previous year. Capri also owns the Michael Kors and Jimmy Choo brands, which also reported a decline in sales.
Capri said in a statement Thursday that the agreement would use proceeds from the sale of Versace to invest in Michael Kors.
“We also believe that the sale of Jimmy Choo will be the right move for Capri,” Bernstein analyst Aneesha Sherman wrote in a research note on Thursday.
When the idol took over Versace, the brand was known for its gorgeous design and iconic Barocco printing, but he later turned it to a softer “quiet luxury” trend. Idols say this transformation is necessary because Versace is already too old on prints. “You don’t want a baroco store to be 70% of baroco stores, which is a bit of a crutch for the company,” Capri chairman and CEO Idol told analysts in February.
He also admitted that the transition was too sudden. While wealthy shoppers embrace a softer design, mid-level shoppers driving Versace sales did not. Revenue growth began to slow down.
“This is not the story they want,” Sherman said in an interview. “These strategies are not the right ones.”
Intensified the problem, Versace raised prices and reduced the number of affordable goods it sold. “We went too far, too fast,” the idol said in February. “The customer who used to shop with us came in and said, ‘I like that, but I can’t afford all of that.’ “Probably the customer was sitting there and saying, ‘Wait a minute. What happened to the old Versace? ‘”
Now Versace is scrambling to eliminate the losses. The company told Bloomberg News that the brand is lowering the price of some core items: Fall silk shirts start at $990 instead of $1,500. For example, its galaxy style starts at $550.
The brand also cuts discounts. The company said that while playoff sales for clothing and footwear still start at 50%, the second price cut is now 60%, and 70% in the past. Versace no longer sells handbags in its full price boutiques.
The idol says the transition is “a painful,” “but it’s the right thing.”
In March, the company announced Donatella Versace resigned as chief creative officer, a position she held since 1997. She has become the chief brand ambassador and supports the company’s philanthropy. MIU MIU former executive Dario Vitale inherited her on April 1.
“We are confident that his talent and vision will help Versace’s future growth,” the idol said of Vital in a statement.
Capri’s chief financial officer Thomas J. Edwards left in April to serve as Macy’s Inc. “There is always a risky element in leadership transition.”
Capri shares have increased further since President Donald Trump promised a large amount of tariffs.
Versace’s sale to Prada was a victory over his idol, who has led Capri since 2003. Wall Street won potential buyers on March 3 after reporting news in the deal talk at Bloomberg on March 3.
But the idol’s plan is not to divide Capri into parts. His goal is to sell the entire company to Tapestry Inc., which owns coach and Kate Spade, for $8.5 billion in 2023. This will bring the idols the helm of Capri for decades. However, last year, a federal judge ruled that a combination of rival groups would hurt competition in the U.S. handbag market could have been a crowning achievement.
The 66-year-old idol has tried to take steps to easily get rid of the daily CEO position in 2021. Capri’s board of directors appoints Joshua Schulman to lead the company so that idols can continue to serve as executive chairman. A few months later, Capri was surprised in an unexplained and surprising face, Schulman left the company and the idol would remain CEO and chairman.
Although the battle for the acquisition of Capris is in court, the idol and his team don’t seem to have made a Plan B for the remaining brands.
“The company is using the excuse of trading with tapestries to conduct inertia,” GlobalData analyst Neil Saunders wrote in a February research note. “This excuse is no longer feasible and the company needs to reinvent and restart.”
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