Capri Sees ‘Softer Demand Globally’ as Q1 Sales Fall 13.2%

Capri Holdings — which is preparing to fend off a regulatory challenge to its $8.5 billion deal to be sold to Tapestry Inc. — continues to struggle on the business front.

The bottom line in the most-recent quarter was pulled down by $10 million in costs tied to a transformation and efficiency program, $4 million in costs tied to the Tapestry deal and other smaller items.

Revenues during the three months ended June 29 fell 13.2 percent to $1.07 billion from $1.23 billion.

The mix of the sales decline mirrored challenges other fashion companies have experienced with wholesale seeing a high-teens decline and retail faring somewhat better with a low-double-digit drop.

“Overall, we were disappointed with our first-quarter results as performance continued to be impacted by softening demand globally for fashion luxury goods,” said John D. Idol, Capri’s chairman and chief executive officer. “We are continuing to manage our operating expenses and inventory levels carefully in light of the challenging global retail environment.”

Despite the weakness, Idol said the company’s brands are still connecting with shoppers.

“Versace, Jimmy Choo and Michael Kors continued to resonate with consumers as evidenced by the 12.6 million new consumers added across our databases, representing 15 percent growth versus last year,” Idol said. “This reflects the strong brand equity and enduring value of our three iconic houses.”

Still, the quarter’s results by brand reflect some tough going.

• Versace’s revenues fell 15.4 percent to $219 million with an operating loss of $17 million.
• Michael Kors’ top line decreased 14.2 percent to $675 million with operating income of $75 million.
• Jimmy Choo’s revenue fell 5.5 percent to $173 million, producing operating income of $4 million.

Capri agreed to a buyout by Tapestry — owner of Coach, Kate Spade and Stuart Weitzman — a year ago this week. While Tapestry sees an opportunity to bring the data and brand savvy it used to turn around Coach to Michael Kors and the other Capri brands, the Federal Trade Commission saw a bid to control the accessible luxury market and sued to stop the transaction.

“Capri intends to vigorously defend this case alongside Tapestry and we look forward to the successful completion of the pending acquisition,” Idol said. “This combination will deliver value to our shareholders as well as provide new opportunities for our dedicated employees around the world as Capri Holdings becomes part of a larger and more diversified company.”