Michael Kors, Versace Parent Furloughs U.S. Workers, Suspends Share Buyback
Capri Holdings Ltd. (CPRI) on Wednesday announced that it would furlough all of its 7,000 employees in North America and suspend share buybacks as its stores remain closed amid the coronavirus pandemic.
The parent to fashion luxury brands Jimmy Choo, Versace and Michael Kors, said it expects shops in North America and Europe to be closed until probably June 1, 2020. During this time, Capri Holdings will continue to pay benefits to support impacted employees. In the U.S. and Canada, furloughed employees are also eligible for unemployment insurance as well as other government relief programs. In a move to cut payroll costs, the company said it would need a smaller workforce once its stores reopen following the end of the pandemic.
“Given our size and scale, we believe that Capri is well-positioned to continue to operate its business despite this unprecedented situation,” said John D. Idol, Capri’s Chairman and Chief Executive Officer. “We have a strong balance sheet and will continue to take disciplined actions to preserve our cash and liquidity.”
Capri’s shares, which plunged over 70% since the beginning of the year, saw some relief on Monday as the stock soared as much as 25% in midday U.S. trading. Wall Street analysts have a Moderate Buy consensus rating on the stock split into 8 Holds and 3 Buys. The $29.67 average price target implies a whopping 182% upside potential in the next 12 months. (See Capri’s stock analysis on TipRanks)
Capri said it decided to suspend its $400 million share buyback plan, significantly reduce fiscal 2021 capital expenditures and inventory purchases, and minimize operating costs. In addition, the board of directors annual cash compensation will be cut by 50% and several executives including CEO Idol, designers and Chief Creative Officers Michael Kors and Donatella Versace will forgo their salary for fiscal 2021, Capri said. Furthermore, the company will seek to reduce overall salaries by about 20%.
The fashion luxury group said that as of April 1, it had about $900 million in cash buffers and had fully drawn the remaining $300 million under a revolving credit facility.
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