It's not surprising Capri Holdings (NYSE:CPRI) has lost two-thirds of its valuation this year as the COVID-19 pandemic shutdown all but essential retail operations. Piper Sandler analyst Erinn Murphy says that means investors will need a much longer timeline to see her investment thesis pay off.
It's not just that consumers are no longer able to go to the store to buy clothes, Murphy said in a note to clients. According to Thefly.com, Sandler says the work-from-home ethos that now permeates many jobs, a condition that may long outlast the crisis, is transforming the way people think about their wardrobe.
A whole new outlook
Murphy had expected Capri's decision to become a luxury design house in the vein of LVMH to accelerate the growth trajectory of its investments in high-end shoemaker Jimmy Choo and upscale design house Versace. However, the "unprecedented macro backdrop" of the pandemic means that thesis is going to take longer to play out.
Equally ominous is the drop in teen spending the investment firm has seen. In Piper Sandler's Spring 2020 Taking Stock With Teens survey, it found that while Michael Kors was the top handbag brand among teens with a 25% share, well ahead of rival Tapestry's Coach brand, which was in fourth place with a 12% share, self-reported teen spending levels tumbled by 13% year over year and was down 4% from its fall survey.
Murphy also lowered her price target for Capri Holdings to $16 from $21, though that still represents nearly 25% upside from current levels.