What happened
Shares of Capri Holdings (CPRI -2.30%), the parent company of Michael Kors and other upscale fashion brands, were hit hard in March as the coronavirus pandemic forced many retailers in North America and Europe to shut down their brick-and-mortar stores indefinitely.
Capri Holdings' shares lost over half of their value in March -- 58.2%, according to data provided by S&P Global Market Intelligence.
So what
To some extent, Capri Holdings saw it coming: The parent of the Michael Kors, Versace, and Jimmy Choo luxury fashion brands warned in February that the impact of the COVID-19 outbreak in China would probably cost it about $100 million in revenue in fiscal 2020.
Image source: Getty Images.
But CEO John Idol had to scramble to deal with the pandemic's arrival in Europe and North America. The company closed all of its stores in North America on March 18, and in Europe on March 19, while admitting that its February guidance was now out the window.
Capri's store employees will continue to be paid through April 10, after which they will be furloughed without pay -- but with benefits -- until stores reopen. In solidarity, the company's top executives will forgo their salaries through fiscal 2021, while other salaried employees will take pay cuts of roughly 20%. (Capri's 2020 fiscal year ended at the end of March.)
Capri has also moved to reduce or cancel its orders for the second half of 2020, in anticipation of sharply reduced retail demand, it said.
Now what
Even though Capri's bond rating was cut to junk status on April 2, the company shares have had a nice bounce since March ended. Data points have emerged showing that social-distancing measures are working, giving retail-minded investors reason to be more optimistic about the sector's prospects -- and some other data points have suggested that affluent consumers are still shopping online while sheltering at home.
Capri is expected to report its financial results for its fourth quarter and the 2020 fiscal year in late May.
