Investment Thesis
Capri Holdings faces significant operational and financial headwinds with declining revenue (-4.1% YoY), razor-thin operating margins (0.7%), and extreme leverage (4.46x debt-to-equity ratio) relative to a minimal equity cushion of only $80M. Weak free cash flow generation ($14M) and deteriorating quick ratio (0.60x) create material refinancing and solvency risks if trends worsen.
Strengths
- Gross margins of 62.3% demonstrate pricing power and brand strength in luxury segment
- Positive operating cash flow of $77M provides near-term liquidity foundation
- Strong interest coverage ratio of 58.5x indicates current debt service is manageable
Risks
- Revenue contraction of 4.1% YoY signals market share erosion or sector weakness in luxury goods
- Operating margin collapse to 0.7% reveals structural profitability deterioration and rising cost pressures
- Extreme debt-to-equity leverage of 4.46x combined with only $80M equity cushion creates acute refinancing risk if credit conditions tighten
- Anemic free cash flow of $14M (0.4% of revenue) insufficient to service $357M long-term debt obligations and fund recovery
- Quick ratio of 0.60x below 1.0 threshold indicates potential liquidity stress if operations deteriorate further
Key Metrics to Watch
- Quarterly revenue growth trajectory and comparable store sales stability
- Operating margin recovery through cost management or pricing initiatives
- Free cash flow generation and debt reduction progress quarterly
- Quick ratio and working capital trends for near-term solvency signals
- Debt refinancing activity and credit facility covenant compliance status
Financial Metrics
Revenue
3.5B
Net Income
137.0M
EPS (Diluted)
$1.14
Free Cash Flow
14.0M
Total Assets
3.2B
Cash
135.0M
Profitability Ratios
Gross Margin
62.3%
Operating Margin
0.7%
Net Margin
3.9%
ROE
171.3%
ROA
4.2%
FCF Margin
0.4%
Balance Sheet & Liquidity
Current Ratio
1.21x
Quick Ratio
0.60x
Debt/Equity
4.46x
Debt/Assets
97.4%
Interest Coverage
58.52x
Long-term Debt
357.0M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-29T07:40:42.701104 |
Data as of: 2026-03-28 |
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