Capri Hit Hard by $675M Impairment Charge in Q3
Updated at 5:14 p.m. ET Feb. 5
Capri Holdings is still looking for its footing.
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Shares of the company, which owns Michael Kors, Versace and Jimmy Choo, dropped 10 percent to $21.61 on Wednesday as investors digested a $675 million non-cash impairment charge in the third quarter, lower sales and a weaker than expected outlook.
“Our business remained challenged during the quarter, and we are disappointed with our results,” said John Idol, chairman and chief executive officer, on a conference call with analysts.
Idol had been prepared to hand off Capri to competitor Tapestry Inc. in an $8.5 billion deal, but since that deal was tripped up by regulators and called off in November, he’s been in recovery and turnaround mode.
“Since the termination of the merger agreement, we have reevaluated our strategic initiatives and long-term growth plans,” Idol said.
“Because we are still in the early stages of execution, our near-term performance will remain challenged,” he said. “Entering 2025, we are optimistic about our path forward. The past one-and-a-half years has provided us with valuable insights that are shaping a promising future. Looking ahead, we expect trends to improve throughout fiscal year 2026, positioning us to return to growth in fiscal 2027 and beyond.”
The CEO plans to lay out more of his vision for the company at an investor day on Feb. 19.
In the meantime, it’s tough going for Capri.
Net losses for the third quarter tallied $547 million, or $4.61 a diluted share, a steep drop off from earnings of $105 million, or 88 cents, a year earlier. On an adjusted basis, income fell to $54 million from $142 million a year earlier. That put adjusted earnings per share at 45 cents, 20 cents below the 65 cents analysts projected, according to Yahoo Finance.
Revenues for the quarter ended Dec. 28 declined 11.6 percent to $1.26 billion. Michael Kors’ sales were down 12.1 percent to $909 million, while Versace’s sales declined by 15 percent to $193 million and Jimmy Choo slipped 4.2 percent to $159 million.
And the company expects its year to end a total of $4.1 billion in revenues — well below the $4.5 billion analysts had penciled in.
Observers and investors seemed surprised by the results.
Neil Saunders, managing director of GlobalData, said: “While it is certainly true that there are challenges in wholesale and that the luxury market is softer, these factors do not explain Capri’s chronic inability to stabilize its sales line. A decline of 11.6 percent is way worse than the market and, along with the drop in retail sales, it signifies that the brands are losing traction with many shoppers.”
Idol acknowledged the company’s weakness, but remains bullish on the brands.
At Versace he said business was impacted by the global decline for fashion luxury goods as well as missteps. “While elevating the assortment, we believed we removed too many unique Versace statement items,” Idol said. “Additionally, we significantly reduced our offerings of products at entry-level luxury price points. This impacted our retail sales but had a more significant impact on our wholesale business. Going forward, we will focus on injecting more energy into Versace’s assortment.”
Michael Kors’ results were hit by the company’s store optimization program and reductions in the wholesale channel. “We are refocusing on the heritage of the Michael Kors brand, adjusting our pricing architecture to align with historical levels, and rebuilding our core and signature assortments to achieve a more balanced product mix,” he said.
Jimmy Choo fared better than the other two brands on sales and the CEO said: “Our product strategy remains focused on further developing accessories and expanding Jimmy Choo’s casual footwear offering. In terms of accessories, we continue to believe the category can expand to 35 percent of the mix from approximately 23 percent today.”
Idol is not the only one looking at Versace and Jimmy Choo and thinking about the future.
With the help of Barclays, Capri started seeking buyers for the two brands late last year.
Capri has not acknowledged the potential sale since WWD first reported on it in December, but it’s been an active process that has drawn some familiar names. Former Gucci CEO Marco Bizzarri, as well as Prada, are said to be taking a close look at Versace while Jimmy Choo cofounder Tamara Mellon is said to be trying to buy back that brand.
Asked about potential asset sales on the call, Idol said: “We’re a public company, and we always are looking at shareholder value. We know we have two highly valuable assets in Jimmy Choo and Versace. We like you have read a lot of the speculation that’s been out in the marketplace. We’re always going to listen to interested parties who may or may not have an interest in these assets. Currently, that’s not what our strategy is. Currently, our strategy is we’re going to build three businesses.”
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