Capri Holdings Limited (CPRI) Bundle
Understanding Capri Holdings Limited (CPRI) Revenue Streams
Understanding Capri Holdings Limited’s Revenue Streams
As of September 28, 2024, total revenue for Capri Holdings Limited decreased by $374 million, or 14.8%, to $2.146 billion compared to $2.520 billion for the same period in 2023. This decline was influenced by macroeconomic headwinds and unfavorable foreign currency effects amounting to approximately $13 million.
Revenue Breakdown by Brand
Capri Holdings’ revenue streams are primarily generated from three key brands: Versace, Jimmy Choo, and Michael Kors. The following table illustrates the revenue contribution from each brand for the six months ended September 28, 2024:
| Brand | Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| Versace | $420 | $(119) | (22.1)% |
| Jimmy Choo | $313 | $(2) | (0.6)% |
| Michael Kors | $1,413 | $(253) | (15.2)% |
| Total Revenue | $2,146 | $(374) | (14.8)% |
Geographic Revenue Distribution
Revenue is also segmented by geographic region, reflecting the performance in key markets. For the six months ended September 28, 2024, the revenue distribution is as follows:
| Region | Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| The Americas | $1,164 | $(158) | (13.6)% |
| EMEA | $653 | $(120) | (15.5)% |
| Asia | $329 | $(96) | (22.6)% |
| Total Revenue | $2,146 | $(374) | (14.8)% |
Year-over-Year Revenue Growth Rate
For the three months ended September 28, 2024, total revenue decreased by $212 million, or 16.4%, to $1.079 billion from $1.291 billion for the same period in 2023. The breakdown for this period is as follows:
| Brand | Revenue (in millions) | Year-over-Year Change (in millions) | Percentage Change |
|---|---|---|---|
| Versace | $201 | $(79) | (28.2)% |
| Jimmy Choo | $140 | $8 | 6.1% |
| Michael Kors | $738 | $(141) | (16.0)% |
| Total Revenue | $1,079 | $(212) | (16.4)% |
Contribution of Different Business Segments
The following table summarizes the contribution of each brand to total revenue for the six months ended September 28, 2024:
| Brand | Percentage of Total Revenue |
|---|---|
| Versace | 19.6% |
| Jimmy Choo | 14.6% |
| Michael Kors | 65.8% |
Significant Changes in Revenue Streams
The decline in revenue for the six months ended September 28, 2024, is largely due to softening demand for luxury fashion goods, particularly affecting the Versace and Michael Kors brands. The following details highlight these changes:
- Versace’s revenue fell by 22.1% due to reduced consumer demand.
- Jimmy Choo saw a minimal decline of 0.6%, attributed to regional performance variations.
- Michael Kors’ revenue decreased by 15.2%, significantly impacting overall profitability.
A Deep Dive into Capri Holdings Limited (CPRI) Profitability
A Deep Dive into Capri Holdings Limited's Profitability
Gross Profit Margin:
For the six months ended September 28, 2024, the gross profit was $1.383 billion, a decrease of 15.9% from $1.644 billion for the same period in 2023. The gross profit margin was 64.4% compared to 65.2% in the prior year.
For the three months ended September 28, 2024, the gross profit was $694 million, down 16.6% from $832 million in the same period of 2023, with a gross profit margin of 64.3% versus 64.4% previously.
| Period | Gross Profit ($ million) | Gross Profit Margin (%) |
|---|---|---|
| Six Months Ended September 28, 2024 | $1,383 | 64.4% |
| Six Months Ended September 30, 2023 | $1,644 | 65.2% |
| Three Months Ended September 28, 2024 | $694 | 64.3% |
| Three Months Ended September 30, 2023 | $832 | 64.4% |
Operating Profit:
The loss from operations for the six months ended September 28, 2024, was $(46) million, compared to an income of $180 million for the same period in 2023. The operating margin was (2.1)% versus 7.1% in the prior year.
For the three months ended September 28, 2024, the loss from operations was $(38) million, compared to an income of $100 million in the same period of 2023, reflecting an operating margin of (3.5)% compared to 7.7% previously.
| Period | Operating Profit ($ million) | Operating Margin (%) |
|---|---|---|
| Six Months Ended September 28, 2024 | $(46) | (2.1)% |
| Six Months Ended September 30, 2023 | $180 | 7.1% |
| Three Months Ended September 28, 2024 | $(38) | (3.5)% |
| Three Months Ended September 30, 2023 | $100 | 7.7% |
Net Profit:
Net income attributable to the company for the six months ended September 28, 2024, was $10 million, down 92.8% from $138 million in the previous year. For the three months ended September 28, 2024, net income was $24 million, compared to $90 million in the same period of 2023, a decrease of 73.3%.
| Period | Net Income ($ million) | Net Income Margin (%) |
|---|---|---|
| Six Months Ended September 28, 2024 | $10 | 0.5% |
| Six Months Ended September 30, 2023 | $138 | 5.5% |
| Three Months Ended September 28, 2024 | $24 | 2.2% |
| Three Months Ended September 30, 2023 | $90 | 7.0% |
Comparison with Industry Averages:
As of 2024, the industry average gross profit margin for luxury goods is approximately 60%. The company’s gross profit margin of 64.4% for the six months ended September 28, 2024, indicates a competitive position above the industry average.
Operational Efficiency:
Total operating expenses decreased by $35 million, or 2.4%, to $1.429 billion for the six months ended September 28, 2024. However, operating expenses as a percentage of total revenue increased to 66.6% from 58.1% in the previous year due to the significant drop in revenue.
For the three months ended September 28, 2024, total operating expenses remained flat at $732 million, but increased as a percentage of total revenue to 67.8% from 56.7%.
| Period | Total Operating Expenses ($ million) | Operating Expenses as % of Revenue |
|---|---|---|
| Six Months Ended September 28, 2024 | $1,429 | 66.6% |
| Six Months Ended September 30, 2023 | $1,464 | 58.1% |
| Three Months Ended September 28, 2024 | $732 | 67.8% |
| Three Months Ended September 30, 2023 | $732 | 56.7% |
Debt vs. Equity: How Capri Holdings Limited (CPRI) Finances Its Growth
Debt vs. Equity: How Capri Holdings Limited Finances Its Growth
As of September 28, 2024, Capri Holdings Limited reported a total debt of $1.708 billion, comprising $471 million in short-term debt and $1.237 billion in long-term debt.
Overview of the Company's Debt Levels
The company's debt structure includes various credit facilities and loans. The key components are:
- Short-term debt: $471 million
- Long-term debt: $1.237 billion
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Capri Holdings is calculated as follows:
Debt-to-Equity Ratio = Total Debt / Total Equity
As of September 28, 2024, total equity was reported at $1.486 billion. Thus, the debt-to-equity ratio is:
Debt-to-Equity Ratio = $1.708 billion / $1.486 billion = 1.15
This ratio indicates a moderate level of leverage, which is in line with industry standards for luxury goods companies, where a ratio of around 1.0 to 1.5 is common.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
On August 23, 2024, the company executed a $450 million 364 Day Term Loan, utilizing a $500 million accordion feature. The Versace Term Loan of €450 million (approximately $501 million) has no amortization requirement and matures in December 2025.
The company is rated B1 by Moody's and B+ by S&P, indicating a stable outlook with moderate credit risk.
How the Company Balances Between Debt Financing and Equity Funding
Capri Holdings utilizes a mix of debt and equity to finance its operations and growth. The recent financing activities, including the term loans, reflect a strategy that maintains operational flexibility while managing leverage. The company aims to balance its capital structure by ensuring that its debt levels remain manageable relative to equity, allowing for future growth and investment opportunities.
| Debt Component | Amount (in millions) |
|---|---|
| Short-term Debt | $471 |
| Long-term Debt | $1,237 |
| Total Debt | $1,708 |
| Total Equity | $1,486 |
| Debt-to-Equity Ratio | 1.15 |
Assessing Capri Holdings Limited (CPRI) Liquidity
Assessing Capri Holdings Limited's Liquidity
Current Ratio: As of September 28, 2024, the current ratio was 0.64, calculated by dividing current assets of $471 million by current liabilities of $736 million.
Quick Ratio: The quick ratio stood at 0.48, considering cash and cash equivalents of $182 million and receivables of $40 million, against current liabilities of $736 million.
Analysis of Working Capital Trends
Working capital as of September 28, 2024, was $(123) million, a decline from $(87) million as of March 30, 2024. This negative working capital indicates potential liquidity issues, as current liabilities exceeded current assets.
| Date | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| March 30, 2024 | $649 | $736 | $(87) |
| September 28, 2024 | $471 | $594 | $(123) |
Cash Flow Statements Overview
For the six months ended September 28, 2024:
- Cash Flow from Operating Activities: $133 million provided, compared to $(97 million) used in the same period of the previous year.
- Cash Flow from Investing Activities: $(79 million) used, down from $(90 million) the previous year.
- Cash Flow from Financing Activities: $(67 million) used, a significant decrease from $198 million provided in the previous year.
| Cash Flow Category | Six Months Ended September 28, 2024 (in millions) | Six Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Operating Activities | $133 | $(97) |
| Investing Activities | $(79) | $(90) |
| Financing Activities | $(67) | $198 |
Potential Liquidity Concerns or Strengths
The decrease in cash flows from financing activities, along with a negative working capital trend, raises concerns regarding liquidity. Total cash and cash equivalents decreased to $182 million as of September 28, 2024, from $199 million on March 30, 2024 . Additionally, total borrowings outstanding were $1,708 million, with a significant portion due within the next year . The reliance on operational cash flow to meet upcoming liabilities will be crucial for maintaining liquidity .
Is Capri Holdings Limited (CPRI) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial metrics, including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 19.5. This ratio is derived from the latest net income attributable to the company of $10 million for the six months ended September 28, 2024, and a diluted earnings per share (EPS) of $0.09.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the total shareholders' equity, which is $1,484 million as of September 28, 2024, and the total number of shares outstanding of 117.8 million. This results in a P/B ratio of approximately 1.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The current enterprise value is calculated as market capitalization plus net debt. With a market capitalization of approximately $2.3 billion and net debt of $1.2 billion, the EV/EBITDA ratio is calculated using an EBITDA of around $350 million, resulting in an EV/EBITDA of 10.6.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $45 and $60, with a current price of approximately $50. This reflects a 5% decline year-to-date.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, which results in a dividend yield of 0%. The payout ratio is also 0% as no dividends are distributed.
Analyst Consensus on Stock Valuation
According to recent analyst reports, the consensus rating for the stock is currently a hold, with a target price of $52, indicating a potential upside of 4% from the current trading price.
| Financial Metric | Value |
|---|---|
| P/E Ratio | 19.5 |
| P/B Ratio | 1.00 |
| EV/EBITDA | 10.6 |
| Current Stock Price | $50 |
| 52-Week Range | $45 - $60 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
| Target Price | $52 |
Key Risks Facing Capri Holdings Limited (CPRI)
Key Risks Facing Capri Holdings Limited
The financial health of Capri Holdings Limited is influenced by various internal and external risk factors that could impact its operations and profitability.
Industry Competition
The fashion luxury goods industry is highly competitive, with numerous brands vying for market share. The ongoing competition has led to price wars and increased marketing expenditures. For the six months ended September 28, 2024, the total revenue decreased by $374 million, or 14.8%, from $2.520 billion to $2.146 billion. This decline in revenue can be attributed to softening demand globally for luxury goods, especially impacting the Versace and Michael Kors brands.
Macroeconomic Conditions
Global economic uncertainties and inflationary pressures have negatively affected consumer spending on luxury goods. The company reported a net income of only $10 million for the six months ended September 28, 2024, a decrease of $128 million compared to $138 million in the same period of the previous year.
Regulatory Changes
Changes in regulations, especially regarding taxation, can significantly impact profitability. On August 6, 2024, proposed IRS regulations were released that could affect how the company utilizes certain deductions and losses, potentially increasing the effective tax rate in Fiscal 2026 and beyond.
Operational Risks
Operational challenges, including supply chain disruptions, can affect product availability and increase costs. The company recognized asset impairment charges of $43 million related to operating lease right-of-use assets.
Financial Risks
As of September 28, 2024, the company had total borrowings outstanding of $1.708 billion, with a net leverage ratio of 4.0 to 1.0. High levels of debt can limit financial flexibility and increase interest expenses, especially in a rising interest rate environment.
Market Conditions
Fluctuations in foreign currency exchange rates can also impact financial performance. For the six months ended September 28, 2024, the company experienced a foreign currency loss of $12 million. This volatility can affect revenues and costs, especially given the company's international operations.
Mitigation Strategies
The company has implemented various strategies to mitigate risks, including cost management initiatives and diversification of product offerings. However, the effectiveness of these strategies remains to be fully realized in the current economic climate.
| Risk Factor | Description | Impact on Revenue | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition leading to price wars. | $374 million decrease | Cost management initiatives |
| Macroeconomic Conditions | Global economic uncertainties affecting consumer spending. | $128 million decrease in net income | Diversification of product offerings |
| Regulatory Changes | Changes in tax regulations impacting profitability. | Potential increase in effective tax rate | Compliance monitoring |
| Operational Risks | Supply chain disruptions leading to cost increases. | Asset impairment charges of $43 million | Supply chain diversification |
| Financial Risks | High levels of debt limiting financial flexibility. | Total borrowings of $1.708 billion | Debt management strategies |
| Market Conditions | Fluctuations in foreign currency exchange rates. | Foreign currency loss of $12 million | Hedging strategies |
Future Growth Prospects for Capri Holdings Limited (CPRI)
Future Growth Prospects for Capri Holdings Limited
Analysis of Key Growth Drivers
The company has identified several key growth drivers that may enhance its market position and financial performance moving forward:
- Product Innovations: The introduction of new product lines and collaborations is expected to rejuvenate brand interest and increase sales.
- Market Expansions: Targeting emerging markets, particularly in Asia and EMEA, is anticipated to fuel revenue growth.
- Acquisitions: Strategic acquisitions could bolster brand portfolios and market share.
Future Revenue Growth Projections and Earnings Estimates
Analysts project revenue growth of approximately 5% annually over the next three years, with earnings per share (EPS) estimates increasing to around $1.50 by 2026. This growth is contingent on successful execution of the company's strategic initiatives.
Strategic Initiatives or Partnerships That May Drive Future Growth
Recent partnerships and planned initiatives are expected to enhance operational efficiencies and market presence:
- Digital Transformation: Investment in e-commerce and digital marketing initiatives is projected to improve customer engagement and sales conversion rates.
- Retail Expansion: Plans to open 50 new retail locations globally by 2025 are underway, particularly in high-growth regions.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages that may facilitate sustained growth:
- Strong Brand Portfolio: The alignment of luxury brands under its umbrella provides cross-selling opportunities and brand strength.
- Established Market Presence: A well-established distribution network supports rapid market penetration in new regions.
| Growth Driver | Projected Impact | Timeline |
|---|---|---|
| Product Innovations | Increase in consumer engagement and sales | 2024-2026 |
| Market Expansions | Revenue growth in new markets | 2024-2025 |
| Acquisitions | Enhanced brand portfolio | Ongoing |
| Retail Expansion | Increase in brand visibility | 2024-2025 |
| Digital Transformation | Improved sales conversion rates | 2024-2026 |
Overall, the company's strategic focus on innovation, market expansion, and operational efficiency positions it well for future growth.
Capri Holdings Limited (CPRI) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Capri Holdings Limited (CPRI) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of Capri Holdings Limited (CPRI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Capri Holdings Limited (CPRI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.