On May 29, 2024, Capri Holdings Ltd (CPRI, Financial) released its 8-K filing announcing its financial results for the fourth quarter and full year fiscal 2024, ended March 30, 2024. Capri Holdings, a global fashion luxury group, includes iconic brands such as Michael Kors, Versace, and Jimmy Choo.
Company Overview
Capri Holdings Ltd (CPRI, Financial) is a marketer, distributor, and retailer of upscale accessories and apparel. The company operates through its three main brands: Michael Kors, Versace, and Jimmy Choo. Michael Kors, the largest brand, offers handbags, footwear, and apparel through more than 800 company-owned stores, wholesale, and e-commerce channels. Versace, acquired in 2018, is renowned for its ready-to-wear luxury fashion, while Jimmy Choo, acquired in 2017, is best known for women's luxury footwear.
Performance and Challenges
For the fourth quarter of fiscal 2024, Capri Holdings reported a total revenue of $1.223 billion, an 8.4% decrease compared to the previous year. On a constant currency basis, revenue decreased by 7.9%. The company faced significant challenges due to softening global demand for fashion luxury goods, impacting both retail and wholesale channels.
Adjusted earnings per share (EPS) for the quarter were $0.42, falling short of the analyst estimate of $0.65. The adjusted operating margin was 6.4%, reflecting a decline from the previous year's 9.1%.
Financial Achievements
Despite the challenges, Capri Holdings managed to add 11.6 million new consumers across its brand databases, representing a 14% growth compared to the previous year. This growth underscores the strong brand equity and enduring value of its three iconic houses.
However, the company reported a net loss of $472 million, or $(4.03) per diluted share, primarily due to non-cash impairments. This compares to a net loss of $34 million, or $(0.28) per diluted share, in the prior year.
Income Statement Highlights
| Metric | Q4 FY2024 | Q4 FY2023 |
|---|---|---|
| Total Revenue | $1.223 billion | $1.335 billion |
| Gross Profit | $767 million | $867 million |
| Operating Margin | 6.4% | 9.1% |
| Net Loss | $(472) million | $(34) million |
| Adjusted EPS | $0.42 | $0.97 |
Segment Performance
Versace reported a revenue of $264 million, a 3.6% decrease on a reported basis and 2.9% on a constant currency basis. The brand's operating income was $1 million, with an operating margin of 0.4%, down from 5.1% in the prior year.
Jimmy Choo's revenue was $137 million, a 9.3% decrease on both reported and constant currency bases. The brand reported an operating loss of $8 million, with an operating margin of (5.8)%, compared to (4.6)% in the prior year.
Michael Kors, the largest segment, reported a revenue of $822 million, a 9.7% decrease on a reported basis and 9.2% on a constant currency basis. The brand's operating income was $116 million, with an operating margin of 14.1%, down from 16.2% in the prior year.
Balance Sheet and Cash Flow
As of March 30, 2024, Capri Holdings had cash and cash equivalents totaling $199 million, with total borrowings outstanding at $1.723 billion, resulting in a net debt of $1.524 billion. Net inventory was $862 million, an 18.4% decrease compared to the prior year.
Cash flow from operating activities for the fourth quarter was an inflow of $44 million, while free cash flow was an outflow of $6 million. For the full year, cash flow from operating activities was an inflow of $309 million, with free cash flow at $120 million.
CEO Commentary
"Overall, we were disappointed with our results as performance in the fourth quarter continued to be impacted by softening demand globally for fashion luxury goods. In our retail channel, sales trends improved sequentially in the Americas and EMEA while trends slowed in Asia. In our wholesale channel, sales remained challenged," said John D. Idol, Chairman and CEO of Capri Holdings Ltd.
Conclusion
Capri Holdings Ltd (CPRI, Financial) faced a challenging fourth quarter and fiscal year 2024, with revenue and earnings falling short of analyst estimates. The company continues to navigate a difficult global market for fashion luxury goods, but remains focused on executing strategic initiatives to drive long-term sustainable growth. Investors will be closely watching the company's efforts to improve performance and the outcome of its pending acquisition by Tapestry, Inc.
Explore the complete 8-K earnings release (here) from Capri Holdings Ltd for further details.
