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Bear of the Day: Capri Holdings Limited (CPRI)

Benjamin Rains

Capri Holdings (CPRI) shares have tumbled nearly 70% in 2020. The global luxury fashion firm has fallen victim to the coronavirus economic downturn and its near-term outlook has deteriorated. 

Fashion Problems

Capri owns Michael Kors, Jimmy Choo, and Versace. The company used to be called Michael Kors Holdings Ltd. until it officially closed its deal to buy high-end giant Versace at the end of 2018. The company hoped the deal would help expand its global reach and boost its exposure in fast-growing Asian markets.

Investors didn’t react that kindly to the deal at the time and now the coronavirus has shutdown many non-essential businesses around the world. And Capri announced on Monday, April 6 that it would furlough all its 7,000 retail store employees in North America amid the coronavirus pandemic.

Capri now anticipates that its retail stores in North America and Europe will be closed until approximately June 1, “and will only reopen once it is deemed safe to do so.” Capri also stated in the same press release that it “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.”









On Wednesday, the Commerce Department said that U.S. retail sales fell 8.7% in March. This represented the largest month-over-month decline since the records began in 1992. More specifically, sales at clothing stores tumbled by more than 50%.

Capri is in a tough spot because even if world economies start to open up sooner than later, the rollout will likely be slow. And it’s hard to think that luxury fashion will be at the top of the list of companies that will open their doors first.

That said, our current Zacks estimates call for Capri’s current-quarter sales to sink over 7%. Meanwhile, its adjusted quarterly earnings are projected to fall roughly 21% to $0.50 a share.







Bottom Line

Capri’s earnings revisions trends have slipped recently, with its current-quarter outlook down 33%. These negative earnings trends help Capri hold a Zacks Rank #5 (Strong Sell) right now. The stock is also part of an industry that rests in the bottom 18% of our more than 250 Zacks industries.

CPRI stock fell over 8% during regular trading on Thursday to $12.24 a share. The stock is now down over 75% in the last 12 months and eventually some investors might want to scoop up the beatdown luxury fashion company. But until there are some signs that its stores will be able to reopen sometime soon, it is likely best to stay away.

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