Business Overview and Segments
Capri is a luxury goods retailer, owning three brands; Michael Kors (MK), Jimmy Choo (JC), and Versace (V). The company only owned MK for most of its history, until it recently decided to become a ‘luxury brand house’ that owns multiple luxury brands by buying Jimmy Choo in 2017 and Versace in 2018. Remember, when a company starts buying lots of companies that’s usually a red flag, and in this case you could argue that they started doing this because of flat growth in their core brand, Michael Kors. A lot of people also thought that they over-paid for these acquisitions, buying JC for US$1.2B and V for US$2.1B, when the former is barely profitable and the latter is not at all. However, the value proposition here was that JC and V needed more reach, and to do so they needed money, and since MK was making lots of FCF but with nowhere to put the cash to use, they figured this would be a symbiotic relationship. Their main goal is to open more physical stores for JC and V, whilst hoping to increase (or in the case of V, create) their profitability. JC and V are both still relevant and popular brands that will see growth into the future, however, MK has used heavy discounting in recent years making its brand value deteriorate accordingly.
Brand – MK, JC, and V all possess a brand moat – the high-end luxury brands are sought after despite their hefty price tags.
Key Facts and Figures
| Risk of Bankruptcy | Moderate |
| Last Year’s Growth | 6% (Low-Moderate) |
| ROIC (Company Quality) | 9% (Moderate) |
| Free Cash Flow Margin (Company Strength) | 18% (High) |