Capri Holdings’ Strategic Transformation: Versace Sale Bolsters Financial Position and Growth Potential

Simeon Siegel, an analyst from BMO Capital, maintained the Buy rating on Capri Holdings (CPRI – Research Report). The associated price target remains the same with $31.00.

Simeon Siegel’s rating is based on Capri Holdings’ strategic financial maneuvers, particularly the sale of Versace for $1.375 billion. This transaction is significant as it transforms Capri Holdings from a company with one of the highest net leverage ratios to one with one of the best, shifting from net debt to a net cash position. This change is expected to remove the valuation discount often associated with over-leveraged retailers.
Moreover, the proceeds from the sale are anticipated to strengthen the company’s balance sheet, enabling accelerated strategic investments in its remaining brands, Michael Kors and Jimmy Choo, and potentially increasing shareholder value through debt reduction and future share repurchases. Despite some skepticism regarding the turnaround of Michael Kors and Jimmy Choo, Siegel sees the cash infusion and improved financial position as a compelling opportunity that is not yet fully reflected in the stock’s current valuation.

In another report released today, Wells Fargo also maintained a Buy rating on the stock with a $25.00 price target.

CPRI’s price has also changed dramatically for the past six months – from $43.150 to $14.630, which is a -66.10% drop .