Capri Holdings Limited — Form 10-K Summary
Reporting period: Fiscal year ended March 27, 2021 (52 weeks), compared with the fiscal year ended March 28, 2020. Although the request metadata refers to “2020 Q4,” this filing reports full-year Fiscal 2021 results, not a standalone fourth quarter.
Business context
Capri is a global luxury-fashion group comprising Versace, Jimmy Choo and Michael Kors. Fiscal 2021 revenue mix was approximately 18% Versace, 10% Jimmy Choo and 72% Michael Kors. The company sells through retail stores, e-commerce, wholesale and licensing channels. The filing attributes broad operating disruption and lower demand to COVID-19, including store closures, reduced traffic and tourism, and weaker wholesale activity.
Key financial results
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Revenue | $4.060 billion | $5.551 billion |
| Gross profit / gross margin | $2.597 billion / 64.0% | $3.271 billion / 58.9% |
| Operating income (loss) / margin | $19 million / 0.5% | $(192) million / (3.5)% |
| Net loss attributable to Capri | $(62) million | $(223) million |
| Operating cash flow | $624 million | $859 million |
| Capital expenditures | $111 million | $223 million |
| Cash and cash equivalents at year-end | $232 million | $592 million |
| Working capital at year-end | $(75) million | $493 million |
| Total debt carrying value at year-end | $1.342 billion | $2.179 billion |
Fiscal 2021 cash, cash equivalents and restricted cash totaled $234 million in the cash-flow statement; the balance sheet reports $232 million of cash and cash equivalents plus $2 million of restricted cash. The company reported $1.350 billion of debt before unamortized issuance costs and discount. Operating lease liabilities were $2.104 billion on the balance sheet; undiscounted future operating lease payments totaled $2.314 billion.
Changes versus prior year
- Revenue fell 26.9% as reported, or 28.8% on a constant-currency basis, with declines across all three brands. Michael Kors revenue declined 29.6%, Jimmy Choo 24.7% and Versace 14.8% as reported.
- Gross margin increased 5.1 percentage points, primarily reflecting Michael Kors’ higher average unit price and favorable channel mix.
- Operating results improved from a $192 million loss to $19 million of income, but included $316 million of asset impairment charges. The prior year included $708 million of impairment charges.
- Cash from operations decreased $235 million to $624 million. Cash declined by $358 million during the year, while financing activities used $870 million, largely reflecting debt repayments.
- Debt carrying value declined by $837 million year over year. At year-end, the company had no borrowings under its $1 billion revolving facility and reported $973 million of remaining availability, subject to facility terms.
Outlook, risks and unusual items
- Management outlook: Management said available cash, operating cash flow and revolving credit availability should meet working-capital needs for the next 12 months and beyond. It expected Fiscal 2022 capital expenditures of approximately $200 million. This is not a revenue or earnings forecast.
- Store optimization: Capri planned to close approximately 170 stores over two fiscal years and expected about $75 million of one-time costs, most involving future cash expenditures. It had closed 101 stores under the program by March 27, 2021; Fiscal 2021 net restructuring charges for the program were $5 million.
- Impairments: Fiscal 2021 included $94 million of Jimmy Choo goodwill impairment and $69 million of Jimmy Choo brand-asset impairment. Management noted that future impairments could result if projections, market conditions or valuation assumptions change.
- COVID-19 and operating risks: The filing warns that renewed restrictions, weak consumer traffic or spending, wholesale-customer distress, supply-chain disruption and delayed collections could further harm sales, cash flow and liquidity. Other material risks include fashion and pricing pressure, foreign exchange, tariffs and the expiration of the U.S. Generalized System of Preferences program.
- Debt and covenants: A temporary $230 million revolving facility was terminated May 25, 2021. The company elected on May 26, 2021 to end the covenant-relief period; the maximum net leverage covenant of 4.00 to 1.00 then applied. The filing says the company was in compliance with applicable covenants at the relevant dates.
- Other items: Fiscal 2021 income tax expense was $66 million despite only $3 million of pretax income; the effective tax rate was not meaningful. The company recognized $37 million of government assistance and subsidies. Its share repurchase program was suspended during the year and reinstated after year-end, with $400 million remaining under the authorization.
- Controls and contingencies: Management and the auditor reported effective internal control over financial reporting. The company described routine legal proceedings and did not expect their aggregate outcome to have a material adverse effect.
Important facts for investors to verify
- Whether revenue, store traffic and margins recover after pandemic-related disruption, particularly for Michael Kors and Jimmy Choo.
- Cash generation, working-capital needs, borrowing availability and compliance with the reinstated leverage covenant.
- Whether Jimmy Choo’s remaining goodwill and brand value are supportable given the impairment charges and limited valuation headroom for its retail reporting unit.
- The ultimate cash cost and timing of the planned store closures, alongside the company’s substantial lease commitments.
- Inventory and wholesale-customer exposure, including purchase obligations, collections, markdowns and potential tariff or duty changes.