Capri Holdings Limited, the aggregate of Michael Kors, Versace, and Jimmy Choo, provided an update on the coordinated actions the company is taking to protect its employees and maintain the company’s financial position in response to the continued global health and economic impact of the COVID-19 pandemic.
“The impact of COVID-19 on the world and the global economy is changing rapidly in ways we could not have anticipated,” said John D. Idol, Chairman and Chief Executive Officer. “This is a very challenging time for our business. We are diligently working to address this unprecedented situation by taking measures to protect our employees and maintain the company’s financial flexibility. We do not take any of these measures lightly, particularly with respect to our employees who are the heart and soul of our company. We believe that these actions are necessary in order to enable us to overcome the burdens of this financial crisis. We continue to believe in the power of our three fashion luxury brands and the resiliency of our company to navigate these extraordinary times.”
Mr. Idol continued, “Given our size and scale, we believe that Capri is well-positioned to continue to operate its business despite this unprecedented situation. We have a strong balance sheet and will continue to take disciplined actions to preserve our cash and liquidity. Leveraging our strong relationships with our vendors, suppliers and landlords, we intend to work together in an effort to maintain our financial strength. Given our current projections of the future impact of COVID-19 on the global economy and our business, we are optimistic that Capri will rebound and believe we have the financial resources to emerge a strong company.”
As of April 1, 2020, the company had total cash and cash equivalents on its balance sheet of approximately $900 million. The Company has fully drawn the remaining $300 million of availability under its revolving credit facility.
The company has also taken further additional actions to preserve its cash flows and maintain its financial strength, including the reduction by 50% of the total cash compensations budget for the company’s board of directors.
It should also be remembered that Capri Holdings joined the long list of fashion’s heritage houses and mega conglomerates in their fight against the Coronavirus pandemic. Announced on few days ago, Capri’s three brands will devote more than $3 million to COVID-19 relief, with a personal donation of $1 million on behalf of Capri Holding’s founder Michael Kors and chairman and chief executive officer John D. Idol.
The company also mentionned in a press release that an update on the operational and financial impacts of the COVID-19 pandemic will be provided on its fourth quarter Fiscal 2020 earnings call.
Reducing Costs and Expenses Measures
- Reducing board of director pay – For Fiscal 2021, the company’s board of directors annual total cash compensation will be reduced by 50%.
- Foregoing and reducing executive compensation – John D. Idol, Chairman and Chief Executive Officer, Michael Kors, Chief Creative Officer of Michael Kors, Donatella Versace, Chief Creative Officer of Versace, and Sandra Choi, Chief Creative Officer of Jimmy Choo, have each voluntarily elected to forgo their salary for Fiscal 2021 (except for the minimum necessary to cover benefits or to otherwise comply with international statutory requirements). In addition, the company will be exploring opportunities to reduce overall salaries at various levels throughout the organization by approximately 20%.
- Restructuring corporate organization – In the future the company anticipates reducing its corporate workforce in order to generate additional payroll savings.
- North America: Furloughing retail staff – Since March 18, 2020, the company has provided salary continuation and benefits to all retail store employees impacted by its temporary store closures that started on that same date and were expected to end on April 10, 2020. The company now anticipates that retail stores in North America and Europe will be closed until approximately June 1, 2020 and will only reopen once it is deemed safe to do so. The company has therefore made the difficult decision that effective April 11, 2020, it will furlough all of its approximately 7,000 North America retail store employees. During this time, the company will continue to pay the employer portion of benefits to support impacted retail personnel. In the United States and Canada, furloughed employees are also eligible for unemployment insurance as well as other government relief programs where available. The company expects to require a smaller workforce as it resets its business post-COVID-19. The goal of the company is to return as many retail employees as possible to work in the second half of the fiscal year as its business rebuilds.
- Europe: Obtaining subsidies – the company is applying for national payroll subsidy programs in various countries throughout Europe to further reduce payroll expense.
- Significantly reducing inventory purchases – The company is diligently managing inventory purchases in light of the store closures in North America and EMEA and the anticipated decreased demand in the second half of the fiscal year by reducing or canceling commitments, redeploying inventory and consolidating upcoming seasons.
- Extending payment terms – The company is working closely with its partners to extend the terms of its future payables. Additionally, the company is working to secure relief of certain payables in order to maintain its financial flexibility for the long term.
- Reducing capital expenditures – The company expects to significantly reduce capital expenditures in Fiscal 2021.
- Minimizing operating expenses – The company is eliminating all non-essential operating expenses, including decreasing marketing spend, delaying or canceling select new store openings, reducing external third-party services and halting unnecessary systems implementations in order to reduce costs.
- Suspending share buybacks – The company is suspending the remaining $400 million under its current share repurchase program.
Featured Photo : © Michael Kors
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