Michael Kors, Jimmy Choo Parent: Worst Is Yet to Come for Pandemic-Induced Losses

Darker days could be yet to come for Capri Holdings Ltd.

The New York-based company — which posted today its fourth-quarter financial report — warned that it could record a “significant” loss per share as well as a 70% decline in revenues for Q1 2021, as the coronavirus pandemic kept 55% of its stores shuttered during the first three months of the new fiscal year.

For the period ended March 28, or Q4, Capri reported adjusted profits of $16 million, or 11 cents per diluted share, versus last year’s $95 million, or $0.63 per diluted share. Revenues, meanwhile, decreased 11.3% to $1.19 billion. Analysts had forecasted earnings of 14 cents per share and sales of $1.12 billion.

“Prior to the impact of COVID-19, our earnings per share outlook was largely on track with our expectations,” chairman and CEO John Idol said in a statement. “While we expect fiscal 2021 to be significantly impacted by the effects of the virus, we are encouraged as we reopen our stores globally, with initial revenue exceeding our expectations.”

Currently, roughly 90% of Capri’s global brick-and-mortar fleet of Michael Kors, Versace and Jimmy Choo stores has reopened. In the Americas, where all outposts shuttered in mid-March, about 70% of its 455 units are back in business, and the company anticipates reopening the “vast majority” of remaining locations by the end of the second quarter. Nearly all of its stores in the Europe-Middle East-Africa regions as well as Asia have resumed operations.

According to the retail group, the sales performance of its units has ranged from 50% to 75% of prior-year levels since reopening, with stronger trends in Mainland China.

During the fourth quarter, Versace’s revenues rose 55.5% to $213 million, while sales at Jimmy Choo fell 23% to $107 million and Michael Kors dropped 18.4% to $872 million.

What’s more, the company added that it was working on “significant” initiatives to combat racism, discrimination and violence following the killings of George Floyd and other Black Americans that galvanized many across the country in recent weeks.

“Capri Holdings is committed to listening, learning and taking the necessary actions to support long-term positive change for the Black community,” Idol said. “While we foster an inclusive environment where employees of diverse backgrounds are welcomed, valued and celebrated, there is more work that we can do to increase diversity at all levels inside our company.”

Over the past few months, the retail group said it has taken steps to preserve liquidity by cutting back on operating expenses, managing inventory, reducing capital expenditures and suspending its share repurchase program. Last week, it entered into a new $230 million revolving credit facility to improve its cash flow. It expects to end 2021’s first quarter with $1.1 billion of liquidity and total borrowings outstanding of $1.8 billion.

Capri, which opted against providing a full-year outlook, shared that it expects to resume its growth trajectory in the 2022 fiscal year.

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