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Capri with 70% plunge in first quarter sales

Jul 6, 2020 United Kingdom
Capri with 70% plunge in first quarter sales
During the first quarter Capri' stores were closed roughly 55% of the period. Given the significant store closures, the gradual recovery in revenue and low wholesale shipments, first quarter fiscal revenue should decline by 70%
"These are unprecedented times as the COVID-19 pandemic has dramatically impacted the entire world. My thoughts and prayers go out to all those who have been affected by the virus. As we manage through this evolving situation, our first priority is to help protect the health and safety of our employees, customers and communities. I want to thank our teams around the globe for the hard work and dedication they demonstrate every day, particularly now as we reopen stores and begin to return to our offices across the globe (...) I would also like to express my heartfelt condolences to the individuals, families and communities affected by the unjust and tragic deaths of George Floyd and Rayshard Brooks as well as the countless victims that have come before them. The systemic discrimination that has led us to this point is deplorable and untenable. At Capri, we stand against racism, discrimination and violence of any kind. As an organization and as individuals, we have an opportunity to positively impact the future", commented John D. Idol, Capri's Chairman and Chief Executive Officer.

Global Business Update

The company has begun to resume store operations globally in accordance with local government’s reopening guidelines while following the health and safety protocols of local authorities and public health organizations and currently, approximately 90% of the company’s global retail fleet of stores are open:
- America: All Versace, Jimmy Choo and Michael Kors stores in America closed in mid-March 2020. Currently, approximately 70% of the 455 retail stores in the region are open and we anticipate opening the vast majority of the remaining locations by the end of the second quarter;
- EMEA: All Versace, Jimmy Choo and Michael Kors locations in EMEA closed in mid-March 2020. Currently, approximately 98% of the 316 retail stores in the region are open;
- Asia: The company began closing stores in Asia in late January. Stores in Asia, led by Mainland China, began reopening earlier in the first quarter and currently 98% of the company’s 500 stores in the region are open;

Retail store performance has ranged from 50% to 75% of prior year levels since stores have reopened, with stronger trends in Mainland China. Results have improved since initial reopening across all regions. Total company ecommerce revenue increased in the fourth quarter, and growth accelerated in the first quarter of fiscal 2021 to a strong double-digit increase compared to prior year. Similar to the company’s directly operated stores, the majority of our department store partners’ locations in the Americas and EMEA closed in mid-March. Stores began to gradually reopen in mid-May and the majority are currently open. Reopened store performance at the point of sale is in line with our company owned stores. However, our partners have placed limited replenishment orders during the quarter.

During the first quarter of fiscal 2021, the company’s global store base was closed for an average of approximately 55% of the period. Given the significant store closures, the gradual recovery in revenue as stores reopen as well as low wholesale shipments, the company expects first quarter fiscal 2021 revenue to decline approximately by 70% compared to prior year. Due to the lower revenue and resulting deleverage, the company anticipates a significant loss per share in the first quarter.

Fourth Quarter Results

Total revenue of 1.2 billion US dollars decreased by 11.3% compared to last year. On a constant currency basis, total revenue declined by 11.0%. Net loss was 551 million US dollars, or (3.69) US dollars per diluted share compared to net income of 19 million US dollars, or 0.13 US dollars per diluted share in the prior year. Adjusted net income was 16 million US dollars, or 0.11 US dollars per diluted share, including the negative impact of 67 million US dollars, or 0.44 US dollars per diluted share of unanticipated non-cash valuation allowances. Last year, adjusted net income totaled 95 million US dollars or 0.63 US dollars per diluted share.

Versace presented revenue 213 million US dollars, increasing by 55.5% compared to the prior year on a reported and constant currency basis. Operating loss of this business segment was 2 million US dollars and operating margin was (0.9)% compared to an operating loss of 11 million US dollars and operating margin of (8.0)% in the prior year. Last year, adjusted operating loss was 6 million US dollars and adjusted operating margin was (4.4)%. As for Jimmy Choo revenue totaled 107 million US dollars decreasing by 23.0% compared to the prior year. On a constant currency basis, total revenue decreased by 24.5%. Jimmy Choo operating loss was 23 million US dollars and operating margin was (21.5)%, compared to operating loss of 8 million US dollars and operating margin of (5.8)% in the prior year. Michael Kors revenue reached 872 million US dollars down by 18.4% compared to the prior year. On a constant currency basis, total revenue decreased by 17.7%. Michael Kors operating income was 139 million US dollars and operating margin was 15.9%, compared to operating income of 166 million US dollars and operating margin of 15.5% in the prior year.

Fiscal Year 2021 Outlook

The company is not providing guidance for its fiscal year 2021 "due to the lack of visibility surrounding the pandemic, macroeconomic fundamentals and tourism".

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