Capri Holdings Ltd., the parent company of Jimmy Choo, Michael Kors, and Versace, is expecting to see top-line sales fall another 70% during the current quarter.
It was in the fiscal 2020 fourth quarter that the fashion house had reported a whopping $551 million loss.
“The COVID-19 pandemic has dramatically impacted the entire world,” John Idol, Capri’s chairman and chief executive officer, told analysts on Wednesday morning’s conference call. “Entering fiscal 2020, we expected this to be an investment year to fund strategic initiatives and position our luxury houses for revenue and operating margin growth.”
Capri temporarily shut all of its stores outside of Asia in mid-March representing only about two weeks out of the quarter. The company however saw impairment charges that included $351 million in the Jimmy Choo brand, $137 million in store damages, $92 million in higher inventory reserves and $30 million in restructuring fees .
The retailer did not begin reopening stores until late May and as of Wednesday, about 90 percent of the company’s retail fleet has reopened. Or about 70 percent of the 455 stores in the Americas and 98 percent of 816 stores in Europe, the Middle East, Africa and Asia.
Executives said on a conference call that traffic in reopened stores is about 50 percent to 75 percent of prior year levels.
“While we have made significant cost reductions, we do not expect they will be enough to offset the considerable decline in the first half [of fiscal year 2021] revenue,” Thomas Edwards, executive vice president, chief financial officer and chief operating officer of Capri, said on the call.
The company said it has plans to close up to 170 physical store locations, the bulk of them in the Michael Kors brand, over the next two years.
“We view our opportunity to resume growth in 2022,” Idol said. “I really have to talk about fiscal 2022 because 2021, we just don’t know when we’ll be back to a more normalized rate.
“We believe in the future and making investments in luxury takes time,” Idol continued. “We don’t all of a sudden just flip a switch and [profit] runs up. Fashion and luxury speak to deep-seated desires for self-expression and creativity and we have no doubt that it will remain long after the global shutdown is behind us.”
Disclaimer: We have no position in Capri Holdings Ltd. (NYSE: CPRI) and have not been compensated for this article.