Capri Holdings CPRI Business Risk Report

I. Operational Risks

A. Supply chain disruptions

1. Mitigation strategies: Capri Holdings addresses supply chain disruptions by diversifying its network of suppliers across various geographies. This reduces the dependency on any single country or supplier. Moreover, effective inventory management practices are implemented to ensure optimal stock levels, minimizing the impact of unexpected supply chain issues.

B. Retail store closures due to COVID-19 or economic downturn

1. Mitigation strategies: Capri Holdings has increased its investment in e-commerce platforms to cushion the impact of physical retail store closures. This approach not only captures the shift towards online shopping but also broadens their market reach. Additionally, the company negotiates flexible lease agreements to adapt quickly to changing economic conditions.

II. Financial Risks

A. Foreign exchange risk due to international operations

1. Mitigation strategies: Capri Holdings engages in various hedging activities and uses financial derivatives to manage risks associated with currency fluctuations. This financial strategy helps stabilize earnings and cash flow in its operations across multiple countries.

B. Fluctuations in consumer demand for luxury goods

1. Mitigation strategies: To counter volatile consumer demand, Capri Holdings conducts extensive market research to remain attuned to consumer trends and preferences. Additionally, the company pursues product diversification across its portfolio of brands to cater to a broader demographic and reduce reliance on any single product category.

III. Strategic Risks

A. Intense competition in the luxury fashion industry

1. Mitigation strategies: Capri Holdings uses brand differentiation and targeted marketing campaigns to distinguish itself from competitors. By emphasizing the unique qualities of each of its brands, such as Michael Kors, Versace, and Jimmy Choo, Capri engages both existing and potential customers effectively.

B. Failure to adapt to changing consumer preferences

1. Mitigation strategies: Capri Holdings fosters innovation in its design processes and maintains agility in product development and manufacturing. This flexibility allows the company to respond swiftly to emerging fashion trends and consumer demands, thus maintaining its competitive edge.

IV. Regulatory Risks

A. Compliance with international trade regulations

1. Mitigation strategies: To ensure compliance with complex international trade regulations, Capri Holdings conducts regular audits and engages with external legal counsel. These practices help in navigating the regulatory challenges in different markets, reducing legal risks and potential fines.

B. Tax law changes impacting profitability

1. Mitigation strategies: Capri Holdings employs strategic tax planning and remains vigilant in monitoring legislative changes in taxation. By proactively managing its tax affairs, the company aims to optimize its tax obligations and mitigate impacts on its profitability.