CPRI.NYSECapri Holdings LTD
DEF: Capri Holdings Faces Challenging Year with Revenue Decline, Announces Versace Sale and Strategic Re-focus
Sentiment:
Proxy Statement
Capri Holdings Limited reported a challenging Fiscal 2025 with a significant revenue decrease, prompting the sale of its Versace brand for $1.375 billion and a strategic pivot to focus on Michael Kors and Jimmy Choo.
Capital raiseThe company entered into a definitive agreement to sell Versace to Prada S.p.A. for $1.375 billion in cash, subject to certain adjustments.The proceeds from this divestiture are intended to invest in future growth, substantially reduce debt levels, and reinstate a share repurchase program, effectively providing capital for the remaining business operations and financial restructuring.
Worse than expectedFiscal 2025 revenue decreased 14.1% to $4.4 billion, indicating a significant decline in financial performance.Strategic initiatives at Versace and Michael Kors did not perform as expected.The company's financial targets for Fiscal 2025 under the Cash Incentive Plan were not attained, with Free Cash Flow and Adjusted Operating Income both below threshold levels, resulting in a 0% payout for these performance measures.Performance Share Units (PRSUs) granted in June 2022 resulted in 0% vesting due to failure to meet threshold performance goals.One-third of PRSUs granted in June 2023 vested at only 21.0% of the annual target, indicating underperformance against goals.Long-term incentive awards granted in June 2025 (for Fiscal 2025 performance) were reduced by an average of 30.4% from target due to performance below expectations.
Summary
- Fiscal 2025 was a challenging year for Capri Holdings, with revenue decreasing 14.1% (or 13.5% on a constant currency basis) to $4.4 billion.
- The company's performance was impacted by continued softness in demand for fashion luxury goods globally and underperforming strategic initiatives at Versace and Michael Kors, as well as uncertainty surrounding the terminated merger with Tapestry, Inc.
- Capri Holdings entered into a definitive agreement on April 10, 2025, to sell Versace to Prada S.p.A. for $1.375 billion in cash, subject to certain adjustments and regulatory approvals, with closing expected in the second half of calendar 2025.
- The company plans to use the proceeds from the Versace sale to invest in future growth, substantially reduce debt levels, and reinstate a share repurchase program.
- Capri Holdings will now focus its resources on the growth opportunities within its Michael Kors and Jimmy Choo luxury brands, implementing new strategic growth initiatives to increase revenues and enhance profitability.
- The company's executive compensation program for Fiscal 2025 reflected financial and operational performance, with the CEO's annual cash incentive payout at 20.0% of target and long-term incentive awards granted in June 2025 reduced by an average of 30.4% from target.
- Performance Share Units (PRSUs) granted in June 2022 did not meet threshold performance, resulting in 0% vesting, while one-third of PRSUs granted in June 2023 vested at 21.0% of the annual target for the Fiscal 2025 performance period.
- The 2025 Annual Meeting of Shareholders will be held virtually on August 7, 2025, to elect directors, ratify auditors, hold advisory votes on executive compensation and its frequency, and approve the Fourth Amended and Restated Omnibus Incentive Plan.
Sentiment
Score: 4
Explanation: The sentiment is moderately negative due to significant revenue decline, underperforming strategic initiatives, and low PRSU payouts in Fiscal 2025. While the Versace sale and strategic re-focus are positive forward-looking steps, they are reactions to past challenges and the failed Tapestry merger, indicating a period of significant restructuring and uncertainty.
Positives
- The definitive agreement to sell Versace to Prada S.p.A. for $1.375 billion in cash provides significant capital.
- Proceeds from the Versace sale are earmarked to invest in future growth, substantially reduce debt levels, and reinstate a share repurchase program, indicating a strong financial strategy post-divestiture.
- The company is re-focusing resources on the compelling growth opportunities within its Michael Kors and Jimmy Choo luxury brands, aiming for increased revenues and enhanced profitability.
- New strategic growth initiatives are in place, supported by a focused senior leadership team and a strong balance sheet, positioning the company for sustainable long-term growth.
- Capri Holdings maintains strong corporate governance practices, including a majority of independent directors, fully independent Board committees, robust share ownership guidelines, and a clawback policy.
- The company demonstrates a commitment to Corporate Social Responsibility (CSR), including environmental sustainability, diversity & inclusion, and philanthropic efforts, with quantifiable progress in ESG goals.
- Shareholders showed widespread support for the executive compensation program in 2024, with 82.1% of votes cast in favor.
Negatives
- Fiscal 2025 was a challenging year, with revenue decreasing 14.1% (or 13.5% on a constant currency basis) to $4.4 billion.
- Performance was negatively impacted by continued softness in demand for fashion luxury goods globally.
- Certain strategic initiatives previously put in place at Versace and Michael Kors did not perform as expected.
- The uncertainty surrounding the terminated merger with Tapestry, Inc. negatively affected Fiscal 2025 performance.
- Performance Share Units (PRSUs) granted in June 2022, with a three-year performance period ending Fiscal 2025, did not attain the threshold level of performance, resulting in 0% vesting.
- One-third of the PRSUs granted in June 2023, with a performance measurement period concluding at the end of Fiscal 2025, will vest at only 21.0% of the annual target number of shares.
- Long-term incentive (LTI) awards granted in June 2025 (attributable to Fiscal 2025 performance) were reduced by an average of 30.4% from the target grant date fair value due to performance below expectations.
Risks
- Continued softness in demand for fashion luxury goods globally.
- Strategic initiatives at Versace and Michael Kors not performing as expected.
- Uncertainty surrounding the merger with Tapestry, Inc. (impacted Fiscal 2025).
- Cybersecurity attacks and incidents, which have occurred in the past and may continue in the future.
- Potential impacts from global trade policies and tariffs.
- Macroeconomic factors that could put downward pressure on the share price.
- Risk of non-deductible compensation due to Section 162(m) limits.
- Potential for excise tax on parachute payments under Sections 280G and 4999 of the Internal Revenue Code.
- Risks related to non-compliance with Section 409A of the Code for deferred compensation.
Future Outlook
Capri Holdings remains optimistic about the long-term growth potential of its iconic brands, Michael Kors and Jimmy Choo. The company plans to invest in future growth, substantially reduce debt levels, and reinstate a share repurchase program following the expected closing of the Versace sale in the second half of calendar 2025. New strategic growth initiatives are designed to increase revenues and enhance profitability, with a focus on engaging new and existing customers, designing innovative products, and delivering exceptional customer experiences. The company anticipates setting sufficiently informed multi-year performance goals and returning to its prior long-term incentive mix of PRSUs and RSUs next year.
Management Comments
- "Fiscal 2025 was a challenging year for Capri Holdings. Revenue decreased 14.1% (or 13.5% on a constant currency basis) to $4.4 billion during the year, as we were impacted by the continued softness in demand for fashion luxury goods globally and by certain strategic initiatives that we previously put in place at Versace and Michael Kors that did not perform as expected as well as by the uncertainty surrounding the merger with Tapestry, Inc."
- "While we were disappointed with our performance, we remain optimistic about the long-term growth potential of Capri Holdings and its iconic brands."
- "As a part of our overall review of strategic priorities, and after careful evaluation, we concluded that the most effective way to maximize value at Capri Holdings is to focus our resources on the compelling growth opportunities within our Michael Kors and Jimmy Choo luxury brands."
- "This transaction positions us to invest in our future growth, substantially reduce our debt levels and reinstate a share repurchase program in the future."
- "Looking ahead, we believe we are on the right path to improving performance with our recently announced strategic growth initiatives that are designed to increase our revenues and enhance our profitability."
- "With our new strategic plans in place, a focused senior leadership team and a strong balance sheet, we believe we are well-positioned to deliver sustainable long-term growth over time."
Industry Context
The document highlights a broader industry trend of softness in demand for fashion luxury goods globally, which negatively impacted Capri Holdings' Fiscal 2025 revenue. The company operates in a highly competitive industry, with many competitors being privately held. The strategic decision to divest Versace and focus on Michael Kors and Jimmy Choo reflects an adaptation to current market conditions and a re-evaluation of core strengths within the luxury retail sector. The company also acknowledges potential impacts from global trade policies and tariffs, indicating a sensitivity to macroeconomic factors affecting the industry.
Comparison to Industry Standards
- Capri Holdings' compensation peer group, used for benchmarking, includes companies with broadly similar characteristics in the retail accessories and/or apparel industry, such as Abercrombie & Fitch Co., Hanesbrands Inc., Under Armour, Inc., American Eagle Outfitters, Inc., Levi Strauss & Co., Urban Outfitters Inc., Burberry Group, lululemon athletic inc., VF Corporation, Columbia Sportswear Company, Deckers Outdoor Corporation, Footlocker Inc., PVH Corp., Ralph Lauren Corporation, and Tapestry, Inc.
- At the time of the Fiscal 2025 review, Capri Holdings was positioned at the 30th percentile for revenue and 38th percentile for market capitalization within its compensation peer group, indicating it is smaller than many of its peers by these metrics.
- The company's Total Shareholder Return (TSR) and peer group TSR are compared against the S&P 500 Apparel, Accessories & Luxury Goods Index in the Pay Versus Performance table, showing a decline in TSR for Capri Holdings from Fiscal 2024 to Fiscal 2025 (from $388.17 to $173.95 for a $100 initial investment) while the peer group also saw a decline (from $81.73 to $75.28), though Capri's decline was more pronounced.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Executive Officer, Michael Kors | Cedric Wilmotte | John D. Idol | 2024-11-26 | Cedric Wilmotte left the Company; John D. Idol assumed the role. |
| Chief Financial Officer and Chief Operating Officer | Thomas J. Edwards, Jr. | Rajal Mehta (Interim Chief Financial Officer) | 2025-06-20 | Thomas J. Edwards, Jr. resigned to pursue another opportunity; Rajal Mehta appointed Interim CFO. |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Plan Amendment Approval Sought | Shareholder approval is sought for the Capri Holdings Limited Fourth Amended and Restated Omnibus Incentive Plan, which would reserve an additional 2,500,000 ordinary shares for awards and extend the plan's expiration to May 20, 2035. The plan includes features like no evergreen provision, no repricing without shareholder approval, no liberal share recycling, limited change in control acceleration, and clawback provisions. | 2025-05-20 | If approved, this amendment will ensure sufficient shares for future equity awards, vital for attracting and retaining talent, while maintaining shareholder-friendly governance features. If not approved, the company may face challenges in talent retention due to insufficient shares for grants. |
| Existing Practice Board Independence | A majority of directors (7 out of 8) and all members of the Audit, Compensation and Talent, and Governance, Nominating and Corporate Social Responsibility Committees are independent. | N/A | Ensures objective oversight and decision-making, promoting shareholder interests. |
| Existing Practice Board Leadership | The company has a combined Chairman and CEO (John D. Idol) counterbalanced by a robust independent Lead Director (Robin Freestone) who presides over executive sessions and serves as a liaison. | N/A | Provides unified leadership while maintaining independent oversight and accountability. |
| Existing Practice Shareholder Accountability | Majority voting in uncontested director elections, annual advisory vote on executive compensation, and a clawback policy for earned cash incentives and performance-based long-term incentives. | N/A | Enhances accountability of the Board and management to shareholders and deters misconduct. |
| Existing Practice Executive Compensation Alignment | Executive compensation program emphasizes pay for performance, with robust share ownership guidelines for executive officers and directors, and a prohibition on hedging company stock. | N/A | Aligns executive and director interests with long-term shareholder value creation and discourages excessive risk-taking. |
| Existing Practice Risk Oversight | The Board, through its committees (Audit, Compensation & Talent, Governance), actively oversees management's approach to strategic, operational, financial, legal, regulatory, reputational, cybersecurity, and ESG risks. | N/A | Provides comprehensive oversight of company risks, ensuring alignment with corporate strategy and mitigation efforts. |
| Existing Practice Corporate Social Responsibility (CSR) | Integrated CSR strategy focusing on governance, environmental impact, community engagement, and philanthropy, with oversight by the Governance Committee. | N/A | Demonstrates commitment to ethical and sustainable business practices, enhancing brand reputation and stakeholder trust. |
Related Party Transactions
- Aircraft Time Sharing Agreement with John D. Idol (Chairman and CEO), allowing personal use of company-owned aircraft. Mr. Idol reimbursed the company $792,572 for operating expenses in Fiscal 2025.
Stakeholder Impact
- Shareholders: Experienced a challenging year with revenue decline and underperforming equity awards (PRSUs). The Versace sale and strategic re-focus aim to maximize value, reduce debt, and potentially reinstate share repurchases, which could positively impact future share price and returns. Approval of the incentive plan is crucial for talent retention, indirectly benefiting shareholders.
- Employees: Faced uncertainty due to the terminated Tapestry merger and executive transitions. Special retention awards were granted to key executives. The company's commitment to diversity & inclusion and employee engagement through its CSR initiatives aims to foster a positive work environment.
- Customers: The softness in demand for fashion luxury goods globally indicates a challenging market for customers. The strategic focus on Michael Kors and Jimmy Choo aims to deliver innovative products and exceptional experiences, potentially improving customer satisfaction.
- Suppliers: The company's Code of Conduct for Business Partners and Factory Social Compliance Program indicate ongoing collaboration with suppliers on human rights, health and safety, environmental, and compliance issues.
- Creditors: The sale of Versace is expected to substantially reduce the company's debt levels, which would improve its financial health and creditworthiness.
Next Steps
- Hold the 2025 Annual Meeting of Shareholders virtually on August 7, 2025.
- Elect two Class II directors for a three-year term.
- Ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for Fiscal 2026.
- Hold a non-binding advisory vote on executive compensation (say on pay).
- Hold a non-binding advisory vote on the frequency of the advisory vote on executive compensation (say on frequency).
- Consider and vote upon the approval of the Capri Holdings Limited Fourth Amended and Restated Omnibus Incentive Plan.
- Close the transaction for the sale of Versace to Prada S.p.A. in the second half of calendar 2025, subject to customary closing conditions including regulatory approvals.
- Invest in future growth and substantially reduce debt levels using proceeds from the Versace sale.
- Reinstate a share repurchase program in the future.
- Implement recently announced strategic growth initiatives designed to increase revenues and enhance profitability for Michael Kors and Jimmy Choo.
- Anticipate setting sufficiently informed multi-year performance goals for long-term incentives next year.
- Return to the prior long-term incentive mix of PRSUs and RSUs next year.
- Hold the 2026 Annual Meeting of Shareholders in August 2026.
- File a registration statement on Form S-8 with the SEC to register ordinary shares for the Share Increase under the Amended Incentive Plan, subject to shareholder approval.
Key Dates
| Date | Description |
|---|---|
| 2003-12-01 | John D. Idol became Chief Executive Officer and a director. |
| 2004-01-01 | Jenna Hendricks joined the Company. |
| 2005-01-01 | Judy Gibbons was employed by Accel Partners in Europe. |
| 2005-01-01 | Krista A. McDonough was an attorney at Paul, Weiss, Rifkind, Wharton and Garrison LLP. |
| 2006-01-01 | Robin Freestone became Chief Financial Officer of Pearson Plc. |
| 2006-01-01 | Jean Tomlin OBE became Director of Human Resources of the London Organising Committee of the Olympic and Paralympic Games. |
| 2007-01-01 | Jane Thompson was Managing Director, International at IAC/InterActiveCorp. |
| 2008-01-01 | Rajal Mehta joined the Company. |
| 2011-08-01 | Krista A. McDonough joined the Company. |
| 2011-09-01 | John D. Idol was appointed Chairman of the Board. |
| 2011-12-01 | Initial public offering (IPO) of the Company. |
| 2011-12-01 | Stephen F. Reitman joined the Board. |
| 2011-12-01 | Effective date of the original Omnibus Incentive Plan. |
| 2012-11-01 | Judy Gibbons joined the Board. |
| 2013-03-01 | Jean Tomlin OBE joined the Board. |
| 2013-01-01 | Jean Tomlin OBE became Founder and Chief Executive Officer of Chanzo Ltd. |
| 2014-12-01 | Prior Aircraft Time Sharing Agreement with John D. Idol. |
| 2015-01-01 | Jane Thompson joined the Board. |
| 2015-05-20 | First amendment and restatement of the Omnibus Incentive Plan. |
| 2016-10-01 | Krista A. McDonough became General Counsel. |
| 2016-11-01 | Robin Freestone joined the Board. |
| 2017-01-01 | Mahesh Madhavan became Chief Executive Officer of Bacardi Limited. |
| 2018-01-01 | Marilyn Crouther became CEO and Principal of Crouther Consulting, LLC. |
| 2019-07-01 | Jenna Hendricks became Senior Vice President, Global Human Resources for Michael Kors. |
| 2019-01-01 | Last advisory vote on frequency of executive compensation was held. |
| 2020-01-01 | Stephen F. Reitman served as President and Chief Executive Officer of Reitmans (Canada) Limited until September 2023. |
| 2020-06-25 | Second amendment and restatement of the Omnibus Incentive Plan. |
| 2020-01-01 | Krista A. McDonough became Chief Sustainability Officer. |
| 2021-03-27 | Fiscal year ended March 27, 2021 (Fiscal 2021). |
| 2021-06-01 | Marilyn Crouther joined the Board. |
| 2021-06-01 | Jenna Hendricks assumed the role of Chief People Officer. |
| 2022-03-29 | Fiscal year ended March 29, 2022 (Fiscal 2022). |
| 2022-05-24 | Third Amended and Restated Incentive Plan adopted by the Board. |
| 2022-06-01 | Grant of PRSUs in June 2022 to Mr. Idol, Mr. Edwards, Ms. Hendricks and Ms. McDonough. |
| 2022-08-03 | Third Amended and Restated Incentive Plan approved by shareholders. |
| 2022-12-20 | New Aircraft Time Sharing Agreement with John D. Idol superseded prior agreement. |
| 2023-03-01 | Mahesh Madhavan joined the Board. |
| 2023-04-01 | Fiscal year ended April 1, 2023 (Fiscal 2023). |
| 2023-04-03 | First day of Fiscal 2023, commencing three-year performance period for June 2022 PRSUs. |
| 2023-04-02 | First day of Fiscal 2023, commencing three-year performance period for June 2023 PRSUs. |
| 2023-04-03 | Cedric Wilmotte's employment agreement became effective as Chief Executive Officer of Michael Kors. |
| 2023-06-01 | Grant of PRSUs in June 2023 to Mr. Idol, Mr. Edwards, Ms. Hendricks and Ms. McDonough. |
| 2023-08-01 | Merger agreement with Tapestry, Inc. originally announced. |
| 2023-12-15 | Letter agreement with Ms. Hendricks regarding compensation for excise tax reduction. |
| 2024-03-30 | Fiscal year ended March 30, 2024 (Fiscal 2024). |
| 2024-06-17 | Equity incentive awards (RSUs) granted to NEOs. |
| 2024-09-04 | 2024 Annual Meeting of Shareholders held; say on pay proposal passed with 82.1% approval. |
| 2024-11-13 | Agreement and Plan of Merger with Tapestry, Inc. mutually terminated. |
| 2024-11-13 | Compensation and Talent Committee approved amendment to Ms. Hendricks' letter agreement to eliminate $500,000 repayment obligation. |
| 2024-11-13 | Compensation and Talent Committee approved special retention awards for Mr. Edwards and Ms. McDonough. |
| 2024-11-20 | Ms. Hendricks repaid the Company $1,500,000 related to prepaid severance. |
| 2024-11-26 | Cedric Wilmotte, CEO of Michael Kors, left the Company; John D. Idol assumed the role. |
| 2024-12-13 | First 50% payment of special retention award and special performance bonus paid to Mr. Edwards and Ms. McDonough. |
| 2024-12-01 | Rajal Mehta became Chief Financial Officer of the Michael Kors brand. |
| 2025-01-01 | Mahesh Madhavan joined the Board of Directors of Reckitt Benckiser Group Plc. |
| 2025-02-01 | Date selected to determine median employee for CEO Pay Ratio calculation. |
| 2025-03-28 | Fiscal year ending March 28, 2026 (Fiscal 2026) for auditor ratification. |
| 2025-03-28 | Last business day of Fiscal 2025. |
| 2025-03-29 | Fiscal year ended March 29, 2025 (Fiscal 2025). |
| 2025-03-29 | Last day of Fiscal 2025; Cedric Wilmotte's employment with the Company ended. |
| 2025-03-29 | End of three-year performance period for June 2022 PRSUs. |
| 2025-03-30 | Commencement of Mr. Wilmotte's one-year base salary continuation period. |
| 2025-04-01 | Thomas J. Edwards, Jr. resigned; Rajal Mehta announced as Interim Chief Financial Officer. |
| 2025-04-10 | Definitive agreement to sell Versace to Prada S.p.A. entered into. |
| 2025-04-01 | Robin Freestone became a non-executive director of Intertek plc. |
| 2025-05-12 | Amendment No. 2 to Schedule 13G filed by FMR LLC. |
| 2025-05-20 | Board of Directors adopted the Fourth Amended and Restated Omnibus Incentive Plan. |
| 2025-05-28 | Annual Report on Form 10-K for Fiscal 2025 filed with the SEC. |
| 2025-06-09 | Record date for the 2025 Annual Meeting of Shareholders. |
| 2025-06-13 | Second 50% payment of special retention award to Ms. McDonough (Mr. Edwards' payment reduced due to repayment obligation). |
| 2025-06-15 | Expiration date for certain options held by John D. Idol, Thomas J. Edwards, Jr., and Krista A. McDonough. |
| 2025-06-20 | Thomas J. Edwards, Jr.'s last day with the Company; Rajal Mehta assumed Interim CFO role. |
| 2025-06-24 | Date of the Proxy Statement; expected mailing date of Notice of Internet Availability of Proxy Materials. |
| 2025-06-01 | Expected vesting date for June 2022 PRSUs (0% vested). |
| 2025-06-01 | Expected issuance of long-term equity incentive awards covering approximately 1.9 million ordinary shares from Existing Incentive Plan. |
| 2025-12-13 | Date before which Ms. Hendricks and Ms. McDonough would be obligated to repay $250,000 if employment terminates. |
| 2025-07-01 | Expected closing of Versace transaction (second half of calendar 2025). |
| 2025-12-31 | End of one-year period for actual total earnings analysis for CEO Pay Ratio. |
| 2026-02-24 | Deadline for shareholder proposals for inclusion in proxy materials for 2026 Annual Meeting. |
| 2026-03-28 | Fiscal year ending March 28, 2026 (Fiscal 2026). |
| 2026-05-09 | Latest date for shareholder notice of proposals/director nominations for 2026 Annual Meeting (assuming meeting date is within 30-70 days of 2025 meeting anniversary). |
| 2026-06-01 | Expected vesting date for one-third of June 2023 PRSUs (21.0% vested). |
| 2026-06-08 | Latest date for shareholder notice under universal proxy rules for director nominees for 2026 Annual Meeting. |
| 2026-08-01 | Expected month for 2026 Annual Meeting of Shareholders. |
| 2028-03-30 | Mahesh Madhavan's deadline to meet share ownership guidelines. |
| 2028-06-01 | Expected end of term for Class II directors if re-elected at 2025 Annual Meeting. |
| 2035-05-20 | Expiration date of the Fourth Amended and Restated Omnibus Incentive Plan. |
Recommendation
holdKeywords
Luxury Fashion, Retail, SEC Filing, Proxy Statement, Capri Holdings, Michael Kors, Jimmy Choo, Versace, Prada, Divestiture, Financial Performance, Revenue, Executive Compensation, Corporate Governance, Risk Management, ESG, Shareholder Meeting, Incentive Plan, Debt Reduction, Share Repurchase
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