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Capri Holdings Blames COVID-19 for Financial Reporting Delay

The global luxury group, Capri Holdings Limited, has decided to delay releasing its most recent quarterly financial statement for up to 45 days, though they did give investors a positive update on global store openings and Asia’s recovery. 

The company, which owns Michael Kors, Versace, and Jimmy Choo, originally planned to report results for the fourth quarter and fiscal year ending March 2020 this week. But in the filing submitted on May 19 to the Security and Exchange Commission, the financial agency that regulates US securities, Capri said that it needed more time for analysis. It wrote that corporate employees involved in finalizing the financial statements are working remotely, and expected to file the annual report for fiscal 2020 before July 11 instead. The company did not respond to a request for comment before publication. 

Capri, however, updating investors on global store openings. To date, they have opened over 50 percent. While the Americas, its largest market, has only a 15 percent of open rate across 455 stores, Asia leads the recovery pace. In Greater China, all of its 288 stores are now open. “Where stores have been open the longest, volumes began to gradually build, with sales in April and May approximately flat to last year at Versace and Jimmy Choo, and approximately 80 percent of prior year levels at Michael Kors for the same period,” the company said in the statement without disclosing further numbers. 

Jing Take

While delaying financial reporting is allowed by the SEC with in-time communication, the market and investors didn’t react well to Capri releasing only good news. It’s evident in the fall of their stock price, which shed 6.60% to $15.29 per share by early afternoon on Friday in New York, as the Dow and S&P 500 fell by less than 1%. 

It’s expected that Capri’s revenue, like the rest of the luxury industry, will be down during the most severe time period of the ongoing COVID-19 crisis. According to Zacks Equity Research, Capri’s fourth quarterly revenue is expected to fall by 12.5%. The question is: will Capri’s actual earnings be larger or smaller than what Wall Street analysts expect? 

With the answer more than a month away, the uncertainty is not great for investors. It might be encouraging for them to read that e-commerce sales of “Versace and Michael Kors almost double prior year levels in April and May” and knowing that the Chairman and CEO, John Idol, remains “confident and optimistic.” But without specificity, it is difficult for investors to gauge the full picture. As a result, Capri’s rosy update on global store openings may not be viewed as a hint of more good news to come, but as an act to divert attention. We’ll know for sure in early July. 

The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

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