Softening demand for luxury fashion impacts Capri Holdings' Q4

Versace parent Capri Holdings Limited reported fourth quarter revenue of 1.223 billion dollars, down 8.4 percent compared to last year. On a constant currency basis, total revenue decreased 7.9 percent.

The company said in a statement that total retail sales declined in the mid-single-digits with trends impacted by softening demand globally for fashion luxury goods. In wholesale, revenue decreased in the high-teens driven by softer demand in the Americas and EMEA.

Given the pending merger transaction of Capri Holdings by Tapestry, the company hasn’t provided financial guidance.

Commenting on the results, John D. Idol, the company’s chairman and CEO said: "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."

Highlights of Capri Holdings’ Q4 performance

Gross profit for the quarter declined to 767 million dollars and gross margin to 62.7 percent, while adjusted gross profit dropped to 767 million dollars and adjusted gross margin to 62.7 percent.

Loss from operations widened to 543 million dollars and operating margin was negative 44.4 percent. Adjusted income from operations declined to 78 million dollars and operating margin was 6.4 percent. Net loss widened to 472 million dollars or 4.03 dollars per diluted share and adjusted net income contracted to 50 million dollars or 42 cents per diluted share.

“Last August Capri Holdings announced that we entered into a definitive agreement to be acquired by Tapestry. The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce, or constrain competition. Capri intends to vigorously defend this case in court alongside Tapestry and we look forward to the successful completion of the pending acquisition,” added Idol.

Review of Capri Holdings results across brand segments

Versace revenue of 264 million dollars, decreased 3.6 percent on a reported basis and 2.9 percent on a constant currency basis driven primarily by softening demand globally for fashion luxury goods. Retail sales increased mid-single-digits while wholesale revenue decreased double-digits. Revenue in the Americas declined 1 percent, while revenue in EMEA decreased 11 percent and revenue in Asia increased 6 percent.

Jimmy Choo revenue of 137 million dollars decreased 9.3 percent on both a reported and constant currency basis. Retail sales decreased low-single-digits while wholesale revenue decreased double-digits. Revenue in the Americas declined 9 percent, while revenue in EMEA decreased 6 percent and revenue in Asia declined 14 percent.

Michael Kors revenue of 822 million dollars decreased 9.7 percent on a reported basis and 9.2 percent on a constant currency basis. Retail sales declined in the high-single-digits while wholesale revenue decreased double-digits. Revenue in the Americas declined 9 percent, while revenue in EMEA decreased 7 percent and revenue in Asia declined 16 percent.