Capri (CPRI) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Capri Holdings reported a challenging Q2 FY25 with significant financial declines, while the CEO emphasized strategic initiatives and consumer engagement amidst the ongoing Tapestry merger legal challenges Second Quarter Fiscal 2025 Highlights Capri Holdings reported a challenging second quarter for Fiscal 2025, with significant declines in revenue and profitability, reflecting a softening global demand for fashion luxury goods Q2 FY25 Key Financial Highlights | Metric | Value | | :-------------------- | :------ | | Revenue decrease | 16.4% | | Adjusted operating margin | 3.0% | | Adjusted earnings per share | $0.65 | CEO Commentary CEO John D. Idol expressed disappointment with the second quarter results due to softening global demand but emphasized the company's focus on strategic initiatives for long-term growth and the continued resonance of its brands, evidenced by significant consumer database growth - The company expressed disappointment with Q2 results due to softening global demand for fashion luxury goods[1] - Despite challenges, the company remains focused on executing strategic initiatives for long-term sustainable growth across Versace, Jimmy Choo, and Michael Kors[1] - The brands resonated with consumers, adding 10.9 million new consumers across databases, representing 13% growth year-over-year[1] Tapestry Merger Update Capri Holdings provided an update on its proposed acquisition by Tapestry, noting the District Court's grant of the FTC's motion for a preliminary injunction, which both companies are appealing - Capri Holdings announced a definitive agreement to be acquired by Tapestry in August 2023[1] - The District Court recently granted the FTC's motion for a preliminary injunction to halt the transaction[1] - Capri and Tapestry have jointly filed a notice of appeal against the decision[1] Company-Wide Financial Performance Capri Holdings experienced significant revenue and profitability declines in Q2 FY25, yet improved net inventory and generated positive free cash flow while reducing net debt Overview of Second Quarter Fiscal 2025 Results Capri Holdings experienced a significant decline in total revenue and profitability in Q2 FY25, primarily due to softening global demand for luxury goods and expense deleverage on lower sales Q2 FY25 Financial Overview (GAAP & Adjusted) | Metric | Q2 FY25 (Reported) | Q2 FY25 (Adjusted) | Q2 FY24 (Reported) | Q2 FY24 (Adjusted) | YoY Change (Reported) | YoY Change (Adjusted) | | :-------------------------------------- | :----------------- | :----------------- | :----------------- | :----------------- | :-------------------- | :-------------------- | | Total Revenue | $1.08 billion | N/A | $1.291 billion | N/A | -16.4% | N/A | | Gross Profit (in millions) | $694 | N/A | $832 | N/A | -16.7% | N/A | | Gross Margin | 64.3% | N/A | 64.4% | N/A | -10 bps | N/A | | (Loss) Income from Operations (in millions) | ($38) | $32 | $100 | $157 | -138.0% | -79.6% | | Operating Margin | (3.5)% | 3.0% | 7.7% | 12.2% | -1120 bps | -920 bps | | Net Income (in millions) | $24 | $77 | $90 | $133 | -73.3% | -42.1% | | Diluted EPS | $0.20 | $0.65 | $0.77 | $1.13 | -74.0% | -42.5% | - Total company retail sales declined high-single-digits, and wholesale revenue decreased double-digits, both impacted by softening global demand[3] - The decline in operating margin primarily reflects expense deleverage on lower revenue[4] Balance Sheet and Cash Flow Capri Holdings improved its net inventory position and generated positive free cash flow in Q2 FY25, while also reducing its net debt compared to the prior year Key Balance Sheet & Cash Flow Metrics (Q2 FY25 vs. Q2 FY24) | Metric | September 28, 2024 | September 30, 2023 | YoY Change | | :-------------------------------------- | :----------------- | :----------------- | :--------- | | Net Inventory (in millions) | $984 | $1,099 | -10% | | Cash Flow from Operating Activities (in millions) | $50 (inflow) | N/A | N/A | | Free Cash Flow (in millions) | $23 (inflow) | ($177) (outflow) | Improved | | Cash and Cash Equivalents (in millions) | $182 | $238 | -23.5% | | Total Borrowings Outstanding (in billions) | $1.71 | $2.079 | -17.7% | | Net Debt (in billions) | $1.53 | $1.86 | -17.7% | Brand-Specific Performance Versace and Michael Kors experienced significant revenue and operating income declines, while Jimmy Choo achieved revenue growth and improved its operating loss, with all brands expanding their consumer databases Versace Performance Versace experienced a significant revenue decline across all regions and shifted to an operating loss in Q2 FY25, primarily due to softening demand and expense deleverage. Despite this, its global consumer database grew Versace Q2 FY25 Financials (in millions) | Metric | Q2 FY25 | Q2 FY24 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Revenue | $201 | $280 | -28.2% | | Operating Loss | ($3) | $35 | N/A | | Operating Margin | (1.5)% | 12.5% | -1400 bps | - Retail sales decreased high-teens, and wholesale revenue decreased double-digits[5] - Revenue declined across all regions: Americas -33%, EMEA -28%, and Asia -20%[5] - Versace's global database increased by 1.1 million new consumers, representing 16% growth[5] Jimmy Choo Performance Jimmy Choo showed revenue growth in Q2 FY25, driven by strong wholesale performance and EMEA region growth, leading to an improved operating margin despite a continued operating loss Jimmy Choo Q2 FY25 Financials (in millions) | Metric | Q2 FY25 | Q2 FY24 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Revenue | $140 | $132 | +6.1% |\ | Operating Loss | ($5) | ($9) | Improved |\ | Operating Margin | (3.6)% | (6.8)% | +320 bps | - Wholesale revenue increased double-digits, while retail sales decreased low-single-digits[6] - EMEA revenue increased 25%, offsetting declines in Americas (-8%) and Asia (-8%)[6] - Jimmy Choo's global database increased by 0.7 million new consumers, representing 13% growth[6] Michael Kors Performance Michael Kors experienced a notable revenue decline across all regions and a significant drop in operating income and margin in Q2 FY25, primarily due to lower revenue and expense deleverage. Its consumer database continued to expand Michael Kors Q2 FY25 Financials (in millions) | Metric | Q2 FY25 | Q2 FY24 | YoY Change | | :---------------- | :------ | :------ | :--------- | | Revenue | $738 | $879 | -16.0% | | Operating Income | $87 | $169 | -48.5% | | Operating Margin | 11.8% | 19.2% | -740 bps | - Retail sales decreased mid-single-digits, and wholesale revenue declined double-digits[7] - Revenue declined across all regions: Americas -12%, EMEA -15%, and Asia -43%[7] - Michael Kors' global database increased by 9 million new consumers, representing 12% growth[7] Corporate Information & Disclosures Capri Holdings is not providing financial guidance due to the pending Tapestry merger and ongoing legal appeal, while emphasizing the use of non-GAAP measures for supplemental insights and outlining various forward-looking risks Outlook and Conference Call Capri Holdings is not providing financial guidance or hosting a conference call due to the pending merger transaction with Tapestry and the ongoing appeal of the FTC's preliminary injunction - The Company is not providing financial guidance or hosting a conference call[8] - This decision is due to the proposed merger transaction with Tapestry, Inc. and the pending appeal of the District Court's decision to grant the FTC's motion for a preliminary injunction[8] Use of Non-GAAP Financial Measures The company uses non-GAAP financial measures, such as constant currency and adjusted figures (excluding impairment, restructuring, ERP, transformation, and merger costs), to provide supplemental insights into operating performance and facilitate comparisons, emphasizing they are not replacements for GAAP - Constant currency effects are non-GAAP financial measures provided to supplement reported operating results and facilitate comparisons, excluding foreign currency rate fluctuations[9] - Non-GAAP financial measures exclude costs associated with impairment charges, restructuring and other charges, ERP implementation costs, Capri transformation costs, and costs related to the Merger[9] - While useful, non-GAAP measures are not intended to replace or substitute amounts presented in consolidated financial statements prepared in conformity with U.S. GAAP[9] About Capri Holdings Limited Capri Holdings is a global fashion luxury group comprising Versace, Jimmy Choo, and Michael Kors, known for glamorous style, craftsmanship, and innovative products across luxury categories, listed on the New York Stock Exchange under CPRI - Capri Holdings is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo, and Michael Kors[10] - The company is committed to glamorous style and craftsmanship, designing exceptional, innovative products across the full spectrum of fashion luxury categories[10] - Capri Holdings Limited is publicly listed on the New York Stock Exchange under the ticker CPRI[10] Forward Looking Statements This section serves as a standard disclaimer, identifying forward-looking statements and outlining various risks and uncertainties that could cause actual results to differ materially, including those related to the proposed Tapestry merger and general economic conditions - The press release contains "forward-looking statements" which are prospective and subject to risks and uncertainties that could cause actual results to differ materially[11] - Risks include changing fashion trends, demand fluctuations, economic pressures (recession, inflation), competition, supply chain disruptions, cybersecurity threats, and geopolitical conflicts[11] - Specific risks related to the proposed Tapestry merger include the FTC's preliminary injunction, the appeal process, potential termination of the merger agreement, and impacts on market price, operations, and relationships[11] Contacts Provides contact information for investor relations and media inquiries - Investor Relations contact: Jennifer Davis, +1 (201) 514-8234, Jennifer.Davis@CapriHoldings.com[12] - Media contact: Press@CapriHoldings.com[12] Financial Schedules (GAAP & Non-GAAP) This section provides detailed unaudited condensed consolidated statements of operations, balance sheets, segment data, retail store information, constant currency data, and GAAP to non-GAAP reconciliations for various periods Condensed Consolidated Statements of Operations Presents the unaudited condensed consolidated statements of operations for the three and six months ended September 28, 2024, and September 30, 2023, detailing revenue, expenses, and net income Condensed Consolidated Statements of Operations (Unaudited, in millions) | Metric | Three Months Ended Sep 28, 2024 | Three Months Ended Sep 30, 2023 | Six Months Ended Sep 28, 2024 | Six Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Total revenue | $1,079 | $1,291 | $2,146 | $2,520 | | Cost of goods sold | $385 | $459 | $763 | $876 | | Gross profit | $694 | $832 | $1,383 | $1,644 | | Total operating expenses | $732 | $732 | $1,429 | $1,464 | | (Loss) income from operations | ($38) | $100 | ($46) | $180 | | Net income | $24 | $90 | $11 | $138 | | Diluted net income per ordinary share | $0.20 | $0.77 | $0.09 | $1.17 | Condensed Consolidated Balance Sheets Provides the unaudited condensed consolidated balance sheets as of September 28, 2024, March 30, 2024, and September 30, 2023, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets (Unaudited, in millions) | Metric | Sep 28, 2024 | Mar 30, 2024 | Sep 30, 2023 | | :-------------------------------------- | :----------- | :----------- | :----------- | | Cash and cash equivalents | $182 | $199 | $238 | | Inventories, net | $984 | $862 | $1,099 | | Total current assets | $1,667 | $1,608 | $1,990 | | Total assets | $6,792 | $6,689 | $7,346 | | Short-term debt | $471 | $462 | $15 | | Long-term debt | $1,237 | $1,261 | $2,079 | | Total liabilities | $5,306 | $5,089 | $5,434 | | Total shareholders' equity | $1,486 | $1,600 | $1,912 | Consolidated Segment Data Details the revenue, operating income, and operating margin for each of Capri Holdings' luxury brands (Versace, Jimmy Choo, Michael Kors) across different geographic regions for the reported periods Revenue by Segment and Region Presents the breakdown of revenue for Versace, Jimmy Choo, and Michael Kors by The Americas, EMEA, and Asia regions for the three and six months ended September 28, 2024, and September 30, 2023 Revenue by Segment and Region (Three Months Ended Sep 28, 2024 vs. Sep 30, 2023, in millions) | Brand | Region | Sep 28, 2024 | Sep 30, 2023 | YoY Change | | :----------- | :----------- | :----------- | :----------- | :--------- | | Versace | The Americas | $64 | $96 | -33.3% | | | EMEA | $90 | $125 | -28.0% | | | Asia | $47 | $59 | -20.3% | | Versace Total | | $201 | $280 | -28.2% | | Jimmy Choo | The Americas | $35 | $38 | -7.9% | | | EMEA | $71 | $57 | +24.6% | | | Asia | $34 | $37 | -8.1% | | Jimmy Choo Total | | $140 | $132 | +6.1% | | Michael Kors | The Americas | $492 | $556 | -11.5% | | | EMEA | $187 | $219 | -14.6% | | | Asia | $59 | $104 | -43.2% |\ | Michael Kors Total | | $738 | $879 | -16.0% | | Total Revenue | | $1,079 | $1,291 | -16.4% | Operating Income and Margin by Segment Provides the operating income and operating margin for Versace, Jimmy Choo, and Michael Kors, as well as for Capri Holdings overall, for the three and six months ended September 28, 2024, and September 30, 2023 Operating Income by Segment (Three Months Ended Sep 28, 2024 vs. Sep 30, 2023, in millions) | Brand | Sep 28, 2024 | Sep 30, 2023 | YoY Change | | :----------- | :----------- | :----------- | :--------- | | Versace | ($3) | $35 | N/A | | Jimmy Choo | ($5) | ($9) | Improved | | Michael Kors | $87 | $169 | -48.5% | | Capri Total | ($38) | $100 | N/A | Operating Margin by Segment (Three Months Ended Sep 28, 2024 vs. Sep 30, 2023) | Brand | Sep 28, 2024 | Sep 30, 2023 | YoY Change | | :----------- | :----------- | :----------- | :--------- | | Versace | (1.5)% | 12.5% | -1400 bps | | Jimmy Choo | (3.6)% | (6.8)% | +320 bps | | Michael Kors | 11.8% | 19.2% | -740 bps | | Capri Total | (3.5)% | 7.7% | -1120 bps | Supplemental Retail Store Information Details the total number of retail stores for each brand (Versace, Jimmy Choo, Michael Kors) and the company as a whole, as of September 28, 2024, and September 30, 2023 Retail Store Count | Brand | As of Sep 28, 2024 | As of Sep 30, 2023 | Change | | :------------ | :----------------- | :----------------- | :----- | | Versace | 236 | 230 | +6 | | Jimmy Choo | 226 | 237 | -11 | | Michael Kors | 755 | 802 | -47 | | Total | 1,217 | 1,269 | -52 | Constant Currency Data Provides a comparison of reported revenue changes versus constant currency changes for each brand and total revenue, highlighting the impact of foreign exchange rate fluctuations Three Months Ended September 28, 2024 Presents the reported and constant currency revenue changes for Versace, Jimmy Choo, and Michael Kors for the three months ended September 28, 2024 Revenue % Change (Three Months Ended Sep 28, 2024) | Brand | % Change As Reported | Constant Currency % Change | | :----------- | :------------------- | :------------------------- | | Versace | (28.2)% | (28.2)% | | Jimmy Choo | 6.1% | 5.3% | | Michael Kors | (16.0)% | (15.9)% | | Total Revenue | (16.4)% | (16.4)% | Six Months Ended September 28, 2024 Presents the reported and constant currency revenue changes for Versace, Jimmy Choo, and Michael Kors for the six months ended September 28, 2024 Revenue % Change (Six Months Ended Sep 28, 2024) | Brand | % Change As Reported | Constant Currency % Change | | :----------- | :------------------- | :------------------------- | | Versace | (22.1)% | (21.5)% | | Jimmy Choo | (0.6)% | —% | | Michael Kors | (15.2)% | (14.7)% | | Total Revenue | (14.8)% | (14.3)% | Reconciliation of GAAP to Non-GAAP Financial Measures Provides detailed reconciliations of GAAP financial measures to adjusted non-GAAP financial measures, excluding the impact of impairment charges, restructuring, ERP implementation, Capri transformation, and merger-related costs for various periods Three Months Ended September 28, 2024 Reconciles GAAP to non-GAAP financial measures for the three months ended September 28, 2024, adjusting for specific non-recurring or non-operational costs GAAP to Non-GAAP Reconciliation (Three Months Ended Sep 28, 2024, in millions) | Metric | As Reported (GAAP) | Impairment Charges | Restructuring & Other Charges | ERP Implementation | Capri Transformation | Merger Related Costs | As Adjusted (Non-GAAP) | | :-------------------------------------- | :----------------- | :----------------- | :---------------------------- | :----------------- | :------------------- | :------------------- | :--------------------- | | Gross profit | $694 | — | — | — | — | — | $694 | | Operating expenses | $732 | ($43) | ($1) | ($4) | ($12) | ($10) | $662 | | Total (loss) income from operations | ($38) | $43 | $1 | $4 | $12 | $10 | $32 | | Net income attributable to Capri | $24 | $33 | $1 | $3 | $9 | $7 | $77 | | Diluted net income per ordinary share | $0.20 | $0.28 | $0.01 | $0.02 | $0.08 | $0.06 | $0.65 | Six Months Ended September 28, 2024 Reconciles GAAP to non-GAAP financial measures for the six months ended September 28, 2024, adjusting for specific non-recurring or non-operational costs GAAP to Non-GAAP Reconciliation (Six Months Ended Sep 28, 2024, in millions) | Metric | As Reported (GAAP) | Impairment Charges | Restructuring & Other Charges | ERP Implementation | Capri Transformation | Merger Related Costs | As Adjusted (Non-GAAP) | | :-------------------------------------- | :----------------- | :----------------- | :---------------------------- | :----------------- | :------------------- | :------------------- | :--------------------- | | Gross profit | $1,383 | — | — | — | — | — | $1,383 | | Operating expenses | $1,429 | ($43) | ($2) | ($8) | ($26) | ($15) | $1,335 | | Total (loss) income from operations | ($46) | $43 | $2 | $8 | $26 | $15 | $48 | | Net income attributable to Capri | $10 | $33 | $2 | $6 | $19 | $11 | $81 | | Diluted net income per ordinary share | $0.09 | $0.28 | $0.02 | $0.05 | $0.16 | $0.09 | $0.69 | Three Months Ended September 30, 2023 Reconciles GAAP to non-GAAP financial measures for the three months ended September 30, 2023, adjusting for specific non-recurring or non-operational costs GAAP to Non-GAAP Reconciliation (Three Months Ended Sep 30, 2023, in millions) | Metric | As Reported (GAAP) | Impairment Charges | Restructuring & Other Charges | ERP Implementation | Capri Transformation | Merger Related Costs | As Adjusted (Non-GAAP) | | :-------------------------------------- | :----------------- | :----------------- | :---------------------------- | :----------------- | :------------------- | :------------------- | :--------------------- | | Gross profit | $832 | — | — | — | — | — | $832 | | Operating expenses | $732 | ($20) | — | ($4) | ($29) | ($4) | $675 | | Total income from operations | $100 | $20 | — | $4 | $29 | $4 | $157 | | Net income attributable to Capri | $90 | $16 | — | $3 | $21 | $3 | $133 | | Diluted net income per ordinary share | $0.77 | $0.13 | — | $0.03 | $0.18 | $0.02 | $1.13 | Six Months Ended September 30, 2023 Reconciles GAAP to non-GAAP financial measures for the six months ended September 30, 2023, adjusting for specific non-recurring or non-operational costs GAAP to Non-GAAP Reconciliation (Six Months Ended Sep 30, 2023, in millions) | Metric | As Reported (GAAP) | Impairment Charges | Restructuring & Other Charges | ERP Implementation | Capri Transformation | Merger Related Costs | As Adjusted (Non-GAAP) | | :-------------------------------------- | :----------------- | :----------------- | :---------------------------- | :----------------- | :------------------- | :------------------- | :--------------------- | | Gross profit | $1,644 | — | — | — | — | — | $1,644 | | Operating expenses | $1,464 | ($20) | $2 | ($9) | ($57) | ($4) | $1,376 | | Total income from operations | $180 | $20 | ($2) | $9 | $57 | $4 | $268 | | Net income attributable to Capri | $138 | $16 | $12 | $7 | $45 | $3 | $221 | | Diluted net income per ordinary share | $1.17 | $0.14 | $0.10 | $0.06 | $0.38 | $0.02 | $1.87 |