Question

Financial Analysis Project

Company: Capri Holdings

1. Provide a description of your selected business

   • - In what primary industry are the firms?

   • - What do the companies do?

   • - What are their major products and/or services?

   • - Who are their customers?

   • - How does the company differentiate from its competition?

2. Locate your selected company’s mission statement and summarize and comment on its provisions.

3. Identify the various classes of stock, both authorized, issued and outstanding. Does the company repurchase their own stock, and if so, what goal are they attempting to achieve?

4. Review the Independent Auditors Report.

   • - What type of opinion was given: unqualified (standard), modified, qualified,

     adverse or disclaimer?

   • - If the opinion is modified or qualified, why?

   • - Name of the CPA firm issuing the report? Is the firm one of the "Big 4"?

5. Analyze the management’s discussion and analysis section and summarize the forward-looking information in this section.

   • - Briefly summarize the financial events (sales, expense, etc.) mentioned.

   • - Is management optimistic or pessimistic about the future of the company?

     Explain.

   • - What future goals are mentioned for the company?

   • - Has the company and/or the industry as a whole, been impacted by the recent

     economics? How so?

   • - Are there any current events impacting the company and/or industry?

Thank you

Answer 1

Financial Analysis Project

Company: Capri Holdings

1. Provide a description of your selected business

• - In what primary industry are the firms?

  • Operate in the global luxury goods industry

• - What do the companies do?

  • ​​​​​​​Selling the global luxury goods products.

• - What are their major products and/or services?

  • ​​​​​​​Our brands cover the full spectrum of fashion luxury categories including women’s and men’s accessories, footwear and ready-to-wear, as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products.

• - Who are their customers?

  • ​​​​​​​Partner with leading wholesale customers, such as Bergdorf Goodman, Saks Fifth Avenue, Neiman Marcus, Bloomingdale’s and Macy’s in North America, as well as Harrods, Harvey Nichols, Printemps, Selfridges and Galeries Lafayette in Europe.

• - How does the company differentiate from its competition?

  • ​​​​​​​We face intense competition in the product lines and markets in which we operate from both existing and new competitors. Our products compete with other branded products within their product category. In varying degrees, depending on the product category involved, we compete on the basis of style, price, customer service, quality, brand prestige and recognition, among other bases. In our wholesale business, we compete with numerous manufacturers, importers and distributors of products like ours for the limited space available for product display. Moreover, the general availability of manufacturing contractors allows new entrants easy access to the markets in which we compete, which may increase the number of our competitors and adversely affect our competitive position and our business. We believe, however, that we have significant competitive advantages because of the recognition of our brands and the acceptance of our brands by consumers. See Item 1A. “Risk Factors” — “The markets in which we operate are highly competitive, both within North America and internationally, and increased competition based on a number of factors could cause our profitability and/or gross margins to decline.”

2. Locate your selected company’s mission statement and summarize and comment on its provisions.

"Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA"

The company is actively expanding its operations in line with its mission statement and company.

3. Identify the various classes of stock, both authorized, issued and outstanding. Does the company repurchase their own stock, and if so, what goal are they attempting to achieve?

4. Review the Independent Auditors Report.

• - What type of opinion was given: unqualified (standard), modified, qualified, adverse or disclaimer?

  • ​​​​​​​Unqualified.

• - If the opinion is modified or qualified, why?

  • ​​​​​​​NA

• - Name of the CPA firm issuing the report? Is the firm one of the "Big 4"?

  • ​​​​​​​ERNST & YOUNG LLP

5. Analyze the management’s discussion and analysis section and summarize the forward-looking information in this section.

• - Briefly summarize the financial events (sales, expense, etc.) mentioned.

  • ​​​​​​​Companys sales is growing from last year and comparative increase in the cost and expenses are also noted.

• - Is management optimistic or pessimistic about the future of the company? Explain.

  • ​​​​​​​Management is pessimistic about the future of the company. because the management is expecting the rapid growth through aquring the existing brands avalable in market and there may be brands available for sale or not hence its ragarded as pessimistic.

• - What future goals are mentioned for the company?

  • ​​​​​​​Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA.

• - Has the company and/or the industry as a whole, been impacted by the recent economics? How so?

  • ​​​​​​​Costs of Manufacturing and Tariffs.: Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products. This volatility applies primarily to costs driven by commodity prices, which can increase or decrease dramatically over a short period of time. In addition, our costs may be impacted by tariffs imposed on our products and increased duties due to changes in trade terms. On May 10, 2019, the U.S. increased the tariff rate from 10% to 25% on $200 million of imports of select product categories from China. President Trump also announced the potential to expand these tariffs to cover all products entering the U.S. from China including ready-to-wear, footwear and men’s products. If the U.S. follows through on its further proposed China tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the cost of our products could increase which could adversely affect our business. These factors may have a material impact on our revenues, results of operations and cash flows to the extent they occur. We use commercially reasonable efforts to mitigate these effects by sourcing our products as efficiently as possible. In addition, manufacturing labor costs are also subject to degrees of volatility based on local and global economic conditions. We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs to our products.

  • U.S. Tax Reform.: On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act includes significant changes to the U.S. corporate income tax system including, among other things, lowering U.S. statutory federal tax rate and implementing a territorial tax system. The U.S. statutory federal tax rate has been decreased to 21% for Fiscal 2019 and thereafter. The Tax Act also added many new provisions, including changes to bonus depreciation, limits on the deductions for executive compensation and interest expense, a tax on global intangible lowtaxed income, the base erosion anti-abuse tax and a deduction for foreign derived intangible income.

• - Are there any current events impacting the company and/or industry?

  • ​​​​​​​Disruptions in shipping and distribution.: Our operations are subject to the impact of shipping disruptions as a result of changes or damage to our distribution infrastructure, as well as due to external factors. Any future disruptions in our shipping and distribution network could have a negative impact on our results of operations.

  • Channel Shift and Demand for Our Accessories and Related Merchandise.: Our performance is affected by trends in the luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences.