Last week it was the retailers, this week it’s the vendors: Ralph Lauren Corp. and Capri Holdings Ltd. both disclosed on Monday the steps they are taking to navigate the impacts of the COVID-19 pandemic. The moves range from top executives foregoing entire salaries to pay cuts among business leaders at each of the companies to retail and corporate employee furloughs.
Lauren is temporarily furloughing retail employees, and a portion of corporate executives, until June 1, and Capri said it was furloughing 7,000 in-store associates in North America and the new timeline for its store reopenings is closer to June 1.
Among Lauren’s various measures, Ralph Lauren, executive chairman and chief creative officer, will forego his entire salary for fiscal year 2021 in addition to his full fiscal year 2020 bonus. (Lauren’s salary and bonus last year were around $11 million). Patrice Louvet, chief executive officer and president, will reduce his salary by 50 percent during the crisis. All the other 140 members of the executive and global leadership team will reduce their salaries by 20 percent for the first quarter of fiscal 2021.
In addition, Lauren’s board will forego their quarterly cash compensation for the first quarter of fiscal 2021. The company said that a portion of the compensation reductions will be contributed to its Employee Relief Fund, administered by the Emergency Assistance Foundation, to provide grants to employees facing special circumstances and financial hardships during this time. The majority of its previously disclosed $10 million donation by the Ralph Lauren Corporate Foundation has been placed into the company’s Employee Relief Fund.
Lauren’s store employees in North America have been compensated since store closures went into effect in mid-March and will continue to be paid in full through April 11. International store employees in regions where retail operations are required to remain closed have received similar compensation to date, as guided by local government regulations and authorities. Following this period, all of its store employees where retail operations are suspended, as well as employees whose jobs are not conducive to continued remote working, will be placed on unpaid temporary furlough until June 1. This includes the majority of its store employees and a portion of its corporate employees in North America, Europe and select other parts of the world.
These employees will continue to receive regular employee benefits, including health benefits and any government assistance for those eligible. International store employees in regions where retail operations remain closed will receive compensation as guided by local governments and authorities. “Our hope is to bring our employees back to work as soon as it is safe and practical,” said a spokeswoman. The company will assess re-openings on a location by location basis. The corporate employees are from areas such as corporate facilities and creative services who support stores.
As of March 30, 2019, Lauren operated 501 retail stores and 653 shop within shops, and its international licensing partners operated 108 Ralph Lauren stores, 39 Ralph Lauren concession shops and 138 Club Monaco stores and shops.
The company said it is working to reassign some employees across other areas of the business, placing them in high-need functions as well as in its ongoing efforts to manufacture medical supplies, including masks and gowns, for donation.
Lauren noted that its digital flagship businesses remain open and its fulfillment operations have also resumed following a brief closure period to enhance health and safety protocols in its distribution centers.
As far as supplier payments, the company said it will settle payment for finished goods and goods already in production. “Understanding that the scale of the ongoing slowdown of future orders can have a significant impact on our partners’ liquidity, we have a vendor payments program in place which enables suppliers to receive payments on a shortened time frame at favorable market rates,” the company said.
“The impact of COVID-19 on the world, on our industry and on our business is profound and wide-reaching,” said Lauren. “For more than 50 years, we have embraced the idea of timelessness — focusing on what lasts. It has defined not only our products but our business and our culture. It has helped guide our actions in both the best and the most challenging times. And as we face the implications of this global pandemic, it will remain our guiding principle — so that we will not only endure this crisis but thrive again for years to come.”
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Louvet added, “We have a great responsibility to all of our stakeholders — our teams, our consumers, our investors, our partners and the communities who count on us — to ensure that every decision we make in this unprecedented global health crisis considers our ability to serve them over the long term. We have overcome many challenges over the last 53 years because the purpose and values of our company have guided us and enabled us to come out stronger on the other side. They are our compass in this moment, too, as we make tough decisions in the short term to position us for continued long-term strength — as a company, a leader in our industry and an employer to thousands of people around the world.”
These moves were revealed after the stock market closed Monday. Lauren’s stock ended the day at $68.60, up 12.5 percent
Capri Holdings, whose brands include Michael Kors, Jimmy Choo, Versace and Alberto Gozzi Srl, said it will begin furloughing North American associates this month.
“The impact of COVID-19 on the world and the global economy is changing rapidly in ways we could not have anticipated,” John Idol, chairman and ceo of Capri, said in a statement. “This is a very challenging time for our business. We are diligently working to address this unprecedented situation by taking measures to protect our employees and maintain the company’s financial flexibility. We do not take any of these measures lightly, particularly with respect to our employees who are the heart and soul of our company. We believe that these actions are necessary in order to enable us to overcome the burdens of this financial crisis. We continue to believe in the power of our three fashion luxury brands and the resiliency of our company to navigate these extraordinary times.”
In addition, annual compensation for Capri’s board will be reduced by 50 percent for fiscal year 2021. Idol, along with Michael Kors, chief creative officer of the Michael Kors brand; Donatella Versace, chief creative officer of the Versace brand, and Sandra Choi, chief creative officer of Jimmy Choo, have voluntarily decided to forgo their salaries during this time.
According to a June 2019 proxy statement filed with the U.S. Securities and Exchange Commission, Idol’s total compensation, which included share awards and incentive compensation, was $14.35 million for fiscal year 2019. His base salary was $1.35 million.
Michael Kors, who had the same base salary as Idol at $1.35 million, made slightly more in total compensation at $14.36 million in 2019.
On Monday, Capri said the new timeline for its store reopenings is closer to June 1 and the stores “will only reopen once it is deemed safe to do so.”
The company will begin furloughing all of its roughly 7,000 in-store associates in North America on April 11. Employees will receive partial benefits and are eligible to apply for unemployment during this time. A representative for Capri confirmed that the furloughs were only for in-store associates at this time.
In the statement, the retailer added that “in the future the company anticipates reducing its corporate workforce in order to generate additional payroll savings.”
At present, Capri, which also sells by way of its various e-commerce sites and in department stores, has $900 million in cash on its balance sheet. Capri was also one of many firms to draw on a credit facility to free up cash reserves amid the crisis. As of April 1, the company had fully drawn the remaining $300 million from its revolving credit facility.
In February, Capri closed about 150 of its 225 stores in mainland China to help contain the outbreak in the region. The same month, executives said the company was expecting a $100 million revenue loss in the most recent quarter, which ended March 28, as the coronavirus made its way around the globe.
“That’s going to be painful,” Idol said on February’s conference call with analysts. “There’s definitely going to be an impact on all of our brands because of the virus. We’ve taken the trends today and we’ve assumed that nothing gets better through the end of March.
But even before that, the Michael Kors brand faced continued headwinds, while the Jimmy Choo and Versace brands were performing well, thanks to celebrity ambassadors such as Jennifer Lopez and Kaia Gerber.
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The temporary closure of major U.S. department stores, such as Macy’s and Neiman Marcus, along with Selfridges in the U.K. isn’t helping Michael Kors either, which is heavily tied to the retailers. On the last conference call, Idol said at Macy’s alone, the Michael Kors brand can be found in the top 200 Macy’s stores in the U.S.
Even so, Idol said the company is well-positioned to weather the pandemic.
“We have a strong balance sheet and will continue to take disciplined actions to preserve our cash and liquidity,” the ceo said in the statement. “Leveraging our strong relationships with our vendors, suppliers and landlords, we intend to work together in an effort to maintain our financial strength. Given our current projections of the future impact of COVID-19 on the global economy and our business, we are optimistic that Capri will rebound and believe we have the financial resources to emerge a strong company.”
Some of Capri’s cost-saving measures include extending loan repayment terms, reducing capital spend, delaying or canceling new store openings, suspending the current share repurchase program and reducing or eliminating all nonessential expenses, including downsizing marketing spend and the introduction of fewer technical support systems.
The retailer is also reducing inventory in the back half of the year “or canceling commitments, redeploying inventory and consolidating upcoming seasons.”
Shares of Capri Holdings closed Monday at $10.71, up 25.6 percent.
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