Jimmy Choo to target Millennials with accessories focus, more 'fashion active' shoes
Planned investment in Jimmy Choo may have dragged down the share price at Michael Kors this week but the company is upbeat over the luxury footwear brand’s prospects and is working hard to widen its appeal to Millennial consumers as well as retaining its core, slightly older customer base.
On the post-results announcement conference call, Kors CEO John Idol talked up Choo’s prospects and reiterated its target of Choo becoming a $1 billion brand.
That’s an ambitious goal considering it’s currently at ‘only’ $108 million, but it’s being helped by a major focus on new product, although the exec admitted that still more newness is needed.
Its recent nine-piece collaboration with Millennial favourite Off-White was an example of how important newness is, with Idol saying he was “thrilled with the results” that brought “a street fashion aesthetic to luxury footwear”.
The company had supported the collab with a 360 degree marketing campaign, which generated more than 65 million social media impressions globally and helped drive footwear category sales upwards.
Further evidence of the widening appeal of the Jimmy Choo brand and impact of new product came too as he said that the Norway Knit and Lurex trainer, as well as the Shahar sandal booty, “were among our most popular fashion styles,” in the last year, while core pieces such as the Romy pointy-toe pump, Miami trainer and Emily sandal stayed strong.
That said, the company’s drive to turn Choo into an accessories big name was hurt by the category’s performance that “was softer than anticipated due to a lack of new introductions.”
But Idol said the firm has already taken action to add newness into this category with its first new collection, Marianne, debuting this autumn. “We will continue to accelerate new introductions over the coming seasons. However, we expect continued softness in this category in fiscal 2019, as we transition out of older accessories groups,” he added.
The company has expanded its accessories design team to address that lack on newness as Idol said “we see this category as a pillar of our growth strategy.”
He said the new team is “working diligently to introduce multiple new collections over the coming seasons” and the new Marianne offer will act as a bridge between heritage Choo and its newness-focused strategy. It will feature the brand’s signature flip-lock but the lock will have design updates. And the range will feature all-new top-handle and cross-body designs with materials including degradé painted python and soft pebbled leather. It also plans to add new shapes, materials and embellishments to the Marianne collection over the coming seasons.
While the company’s spending on the brand may hold back profits growth, Kors expects Jimmy Choo’s pro-forma revenue to rise around 10% in fiscal 2019. That sales rise is predicted to come on the back of its red carpet activity, as well as on continuing development of its core 24/7 collection and on more trend-focused ‘fashion active’ offerings being added to the wider range following those stronger trainer sales.
On the store front, the company plans to increase the pace of openings adding around 30 net new locations in fiscal 2019. “Given Jimmy Choo's significant global recognition, we believe there is meaningful opportunity to expand our global presence with a particular focus on Asia,” Idol said.
And he seemed particularly excited about the brand’s new autumn campaign featuring supermodels Joan Smalls, Lily Aldridge and Rosie Huntington-Whiteley.
“With a combined Instagram following of over 14 million, the trio of models embody the essence of the Jimmy Choo woman,” he said, adding that the campaign will showcase key fashion silhouettes in a gold theme, “while reinforcing the confidence, glamour and playful personality of Jimmy Choo's DNA.”
The company will highlight the most fashion forward pieces of the collection in the campaign and use the opportunity to support the introduction of Marianne.
But all the investment will mean Jimmy Choo's operating income in fiscal 2019 will be “below its historical level,” although the exec team is “confident the strategic investments we're making Jimmy Choo will position us to achieve our long-term revenue target of $1 billion and an operating margin rate in the low teens, as we build greater global scale and further expand the accessories business.”
Michael Kors COO and CFO Thomas Edwards reiterated on the call that Jimmy Choo revenue will rise, but margins will be slightly lower due to that investment in developing it accessories. But he said “this accelerated top line is extremely important. It sets the stage for further accessories growth in the future. Our overall value case was built on driving this business to $1 billion, this really sets the stage for it. From a margin perspective, it will be lower this year, but we expect it to improve to the low teens as we build scale and build out the higher-margin accessories business.”
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