Capri Holdings Reports Disappointing Q4 Results

Capri Holdings Reports Disappointing Q4 Results

Following Tapestry Acquisition Revenue Fell 7.6% With All Brands Reporting Losses, Including Michael Kors, Jimmy Choo, and Versace

Capri Holdings announced on Wednesday a decline in its sales for the fiscal year 2024. The company’s annual report revealed that its total revenue fell by 7.6 percent from $5.6 billion in fiscal-year 2023 to $5.17 billion in fiscal-year 2024.

All brands under Capri Holdings saw this declining trend, with Michael Kors, Versace, and Jimmy Choo generating lower revenues compared to the previous fiscal year. Michael Kors reported $3.5 billion in sales compared to $3.88 billion for 2023, Versace posted just over $1 billion versus $1.1 billion and Jimmy Choo’s figures fell to $618 million from the $633 million recorded a year earlier.

The disappointing figures came amid widespread speculation concerning Tapestry Inc.’s proposed $8.5 billion acquisition of Capri Holdings. The company refrained from offering financial guidance due to the pending status of the merger announced in August, which faces challenges from the U.S. Federal Trade Commission.

The potential merger would combine Tapestry’s three major brands, Coach, Kate Spade, and Stuart Weitzman, with Capri’s Michael Kors, Versace, and Jimmy Choo. However, this deal is currently under scrutiny by the Federal Trade Commission.

In the fourth quarter, both Michael Kors’ and Versace’s revenue saw a decline on a reported and constant currency basis, while Jimmy Choo’s revenue fell by 9.3 percent. The company attributes this to a global softening in the demand for fashion luxury goods.

Capri’s CEO, John Idol, expressed his disappointment with the fiscal results, attributing the decline to a global decrease in demand for luxury goods. However, he also shared that Versace, Jimmy Choo, and Michael Kors continue to maintain their appeal, attracting 11.6 million new consumers across their databases, marking a 14 percent increase from last year.

The company also revealed a slight increase in store count, with a total of 1,239 stores compared to the previous year’s 1,272. Meanwhile, the fourth quarter saw an 8.4 percent year-over-year decline in sales amounting to $1.2 billion, an adjusted operating margin of 6.4 percent, and adjusted earnings per share of 42 cents.

Idol disputed the Federal Trade Commission’s decision to block the proposed merger with Tapestry, stating that it ignores market realities and won’t limit, reduce or constrain competition. The FTC had previously argued that the merger between Tapestry and Capri’s brands would disrupt direct competition and give Tapestry a dominant share of the ‘accessible luxury’ handbag market.

Reiterating Capri’s plan to defend the case strongly in court, Idol indicated his anticipation for the successful completion of the acquisition. He expressed that the merger would bring added value to shareholders and new opportunities for global employees as Capri integrates into a larger and more diversified company.

When the acquisition was signed by Tapestry’s CEO Joanne Crevoiserat in August, Capri’s price was $57 per share, valuing the company’s shares at $6.7 billion. However, Capri closed at $34.18 on Wednesday, with Tapestry closing at $41.52.