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Capri Holdings Announces More Plans to Fight Coronavirus Scare

Zacks Equity Research

In order to stay financially resilient amid coronavirus-induced crisis, retailers are now taking actions beyond store closures and furloughs. Apart from extending store closure durations, they are resorting to several proactive actions such as pay cuts, cutting down on expenses, and deferring capital and store projects. In line with these measures, renowned apparel and accessories retailer Capri Holdings Limited CPRI has announced further actions.

To improve financial position, Capri Holdings has decided to lower its board cash compensation by 50% annually for fiscal 2021. Moreover, it will cut overall salaries by about 20% at different levels across the organization. Also, certain senior executives have voluntarily agreed to forgo their salary for the fiscal. It has also chosen to eliminate non-essential operating expenses, which include marketing spend, deferring store openings, minimizing external third-party services and pausing unnecessary system implementations. Moreover, Capri Holdings plans to reduce capital spending in fiscal 2021 and put the $400-million share repurchase program on hold along with reducing inventory purchases and extending terms of its future payables.

Apart from curbing costs, management expects to restructure the organization by minimizing the workforce to create additional payroll savings. Further, the company has drawn the remaining $300 million under its revolving credit facility.

In North America, the company’s stores were temporarily closed since Mar 18 and anticipated to reopen on Apr 10, which will now continue to remain shut till Jun 1. Also, its retail stores in Europe continue to be closed until the same time. Consequently, the company will furlough all its North American retail store employees (approximately 7,000), who are eligible for the employee benefits. Capri Holdings has been applying for national payroll subsidy programs in many countries across Europe to lower payroll costs.

Apart from Capri Holdings, other players such as L Brands LB, Macy’s M and Zumiez ZUMZ have taken such measures in the wake of the alarming spread of the pandemic.

Women’s apparel retailer, L Brands, suspended quarterly dividend, cut down on capital expenditures and drew $950 million from its revolving credit facility. The renowned omnichannel retailer, Macy’s, has suspended second-quarter fiscal 2020 dividend and lowered capital expenditures for the current fiscal. The company has also chosen to access the $1.5 billion available under its revolving credit facility. Apparel, footwear and accessories retailer, Zumiez, has decided to suspend hiring, eliminate all bonuses for fiscal 2020, delay most of the merit increases, curb capital spend, extend payment terms for vendor invoices and reduce inventory receipts by canceling or delaying orders.

Price Performance

We note that shares of this global fashion luxury retailer have plummeted 71.7% compared with the industry’s 58.4% plunge over the past three months. Capri Holdings currently carries a Zacks Rank #4 (Sell).

 

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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report
 
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