Business Wire | Nov 5, 2020 06:31AM EST

Capri Holdings Limited Announces Second Quarter Fiscal 2021 Results

Nov. 05, 2020

LONDON--(BUSINESS WIRE)--Nov. 05, 2020--Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the second quarter of fiscal 2021 ended September 26, 2020.

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VERSACE (Photo: Business Wire)

Second Quarter Fiscal 2021 Highlights

* Revenue decline of 23.0%, a significant improvement from the first quarter E-commerce sales improved sequentially, increasing approximately 60% Positive sales in Mainland China across all luxury houses Positive global retail sales at Versace for the three months ended September * Adjusted gross margin expansion of 220 basis points versus prior year * Adjusted operating margin expansion of 240 basis points versus prior year * Adjusted earnings per share of $0.90

John D. Idol, the Company's Chairman and Chief Executive Officer, said, "The COVID-19 pandemic continues to profoundly impact the entire world. My thoughts and prayers go out to all those who have been affected by the virus and to everyone on the front lines who are tirelessly helping combat this pandemic. At Capri Holdings, we are prioritizing the health and safety of our employees, customers and communities. I want to thank our teams around the world for the hard work and dedication they demonstrate every day to support each other and their communities during this unprecedented time."

Mr. Idol continued, "We were pleased with our second quarter results, with revenue and earnings surpassing our expectations. Our performance demonstrates the power and desirability of the Versace, Jimmy Choo and Michael Kors brands. Through creativity and innovation, our luxury houses inspire excitement and passion, creating an emotional connection with our consumers. We are also attracting new consumers to each of our luxury houses as evidenced by the double digit increase in our consumer databases."

Mr. Idol concluded, "As the world continues to emerge from this crisis, we are increasingly optimistic about the outlook for the fashion luxury industry and Capri Holdings. We have an incredible portfolio of luxury houses, each with their rich heritage, exclusive DNA and strong brand loyalty. We are uniquely positioned to drive multiple years of strong growth as we continue to execute on our strategic initiatives."

Second Quarter Fiscal 2021 Results

Financial Results and non-GAAP Reconciliation

The company's results are reported in this press release in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and on an adjusted, non-GAAP basis. A reconciliation of GAAP to non-GAAP financial information is provided at the end of this press release. Due to the current and ongoing impact of the COVID-19 pandemic, the company will not be providing comparable store sales results. The company believes the most comprehensive measure of performance in this environment is total revenues compared to the same period in the prior year.

Overview of Capri Holdings Second Quarter Fiscal 2021 Results:

* Total revenue of $1.1 billion decreased 23.0% compared to last year. On a constant currency basis, total revenue decreased 24.6%. * Gross profit was $710 million and gross margin was 64.0%, compared to $874 millionand 60.6% in the prior year. Adjusted gross profit was $701 million and adjusted gross margin was 63.2%, compared to $879 million and 61.0% in the prior year. * Income from operations was $153 million and operating margin was 13.8% compared to $75 million and 5.2% in the prior year. Adjusted income from operations was $182 million and operating margin was 16.4%, compared to $202 million and 14.0% in the prior year. * Net income was $122 million, or $0.81 per diluted share compared to $73 million, or $0.47 per diluted share in the prior year. Adjusted net income was $137 million, or $0.90 per diluted share, compared to $177 million or $1.16 per diluted share in the prior year. * Net inventory at September 26, 2020 was $930 million, a 13% decrease compared to the prior year.

Versace Second Quarter Fiscal 2021 Results:

* Versace revenue of $195 million decreased 14.5% compared to the prior year. On a constant currency basis, total revenue decreased 18.9%. * Versace operating income was $20 million and operating margin was 10.3% compared to $9 million and 3.9% in the prior year. Last year, adjusted operating income was $14 million and adjusted operating margin was 6.1%.

Jimmy Choo Second Quarter Fiscal 2021 Results:

* Jimmy Choo revenue of $122 million decreased 2.4% compared to the prior. On a constant currency basis, total revenue decreased 6.4%. * Jimmy Choo operating income was break even, compared to an operating loss of $10 million and operating margin of (8.0)% in the prior year.

Michael Kors Second Quarter Fiscal 2021 Results:

* Michael Kors revenue of $793 million decreased 27.2% compared to the prior year. On a constant currency basis, total revenue decreased 27.9%. * Michael Kors operating income was $190 million and operating margin was 24.0%, compared to $222 million and 20.4% in the prior year.

Fiscal Year 2021 Outlook

The company is not providing annual earnings guidance for fiscal year 2021 due to the lack of visibility surrounding the progression of the pandemic, macroeconomic fundamentals, and tourism flows.

Conference Call Information

A conference call to discuss second quarter fiscal 2021 results is scheduled for today, November 5, 2020 at 8:30 a.m. ET. A live webcast of the conference call will be available on the Company's website, www.capriholdings.com. In addition, a replay will be available shortly after the conclusion of the call and remain available until November 12, 2020. To access the telephone replay, listeners should dial 1-844-512-2921 or 1-412-317-6671 for international callers. The access code for the replay is 10011575. A replay of the webcast will also be available within two hours of the conclusion of the call.

Upcoming Event

John D. Idol, Chairman and Chief Executive Officer, and Thomas J. Edwards, Executive Vice President, Chief Financial Officer and Chief Operating Officer, will be participating in a fireside chat at the JP Morgan Virtual Global Consumer, Retail & Luxury Conference held virtually, on Thursday, November 12, 2020 at 10:00 AM Eastern Time. The presentation will be webcast live on the Company's Investor Relations website, www.capriholdings.com. An archived replay will be available approximately one hour after the conclusion of the live event.

Use of Non-GAAP Financial Measures

Constant currency effects are non-GAAP financial measures, which are provided to supplement our reported operating results to facilitate comparisons of our operating results and trends in our business, excluding the effects of foreign currency rate fluctuations. Because we are a global company, foreign currency exchange rates may have a significant effect on our reported results. We calculate constant currency measures and the related foreign currency impacts by translating the current year's reported amounts into comparable amounts using prior year's foreign exchange rates for each currency. All constant currency performance measures discussed below should be considered a supplement to and not in lieu of our operating performance measures calculated in accordance with U.S. GAAP. Additionally, this earnings release includes certain non-GAAP financial measures that exclude certain costs associated with COVID-19 related charges, long-lived asset impairments, ERP implementation costs, Capri transformation costs, restructuring and other charges. The Company uses non-GAAP financial measures, among other things, to evaluate its operating performance and in order to represent the manner in which the Company conducts and views its business. The Company believes that excluding these items helps its management and investors compare operating performance based on its ongoing operations. While the Company considers the non-GAAP measures to be useful supplemental measures in analyzing its results, they are not intended to replace, nor act as a substitute for, any amounts presented in its consolidated financial statements prepared in conformity with U.S. GAAP and may be different from non-GAAP measures reported by other companies.

About Capri Holdings Limited

Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design, style and craftsmanship. Its 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. The Company's goal is to continue to extend the global reach of its brands while ensuring that they maintain their independence and exclusive DNA. Capri Holdings Limited is publicly listed on the New York Stock Exchange under the ticker CPRI.

Forward Looking Statements

This press release contains statements which are, or may be deemed to be, "forward-looking statements." Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri Holdings Limited (the "Company") about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "plans", "believes", "expects", "intends", "will", "should", "could", "would", "may", "anticipates", "might" or similar words or phrases, are forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements. These risks, uncertainties and other factors include the effect of the COVID-19 pandemic and its potential material and significant impact on the Company's future financial and operational results if retail stores are forced to close again and the pandemic is prolonged, including that our estimates could materially differ if the severity of the COVID-19 situation worsens, the length and severity of such outbreak across the globe and the pace of recovery following the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company's credit agreement, the Company's ability to integrate successfully and to achieve anticipated benefits of any acquisition; the risk of disruptions to the Company's businesses; the negative effects of events on the market price of the Company's ordinary shares and its operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the Company's businesses; fluctuations in demand for the Company's products; levels of indebtedness (including the indebtedness incurred in connection with acquisitions); the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company's insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash; changes in consumer traffic and retail trends; loss of market share and industry competition; fluctuations in the capital markets; fluctuations in interest and exchange rates; the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as those risks set forth in the Company's filings with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2020 (File No. 001-35368). Any forward-looking statement in this press release speaks only as of the date made and the Company disclaims any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.

SCHEDULE 1

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

(Unaudited)

Three Months Ended Six Months Ended

September 26, September 28, September 26, September 28, 2020 2019 2020 2019

Total revenue $ 1,110 $ 1,442 $ 1,561 $ 2,788

Cost of goods 400 568 549 1,080 sold

Gross profit 710 874 1,012 1,708

Total operating 557 799 1,021 1,569 expenses

Income (Loss) 153 75 (9) 139 from operations

Other income, - (1) (1) (3) net

Interest 12 3 29 16 expense, net

Foreigncurrency (gain) - 4 (3) 6 loss

Income (loss)before 141 69 (34) 120 provision forincome taxes

Provision for(benefit from) 20 (4) 25 2 income taxes

Net income 121 73 (59) 118 (loss)

Less: Net lossattributable to (1) - (1) - noncontrollinginterests

Net income(loss) $ 122 $ 73 $ (58) $ 118 attributable toCapri

Weightedaverage ordinary sharesoutstanding:

Basic 150,492,275 151,602,502 150,024,293 151,326,037

Diluted 151,677,242 152,576,283 150,024,293 152,455,218

Net income(loss) per ordinary share:

Basic $ 0.81 $ 0.48 $ (0.39) $ 0.78

Diluted $ 0.81 $ 0.47 $ (0.39) $ 0.77

SCHEDULE 2

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

September March 28, September 26, 2020 28, 2020 2019

Assets

Current assets

Cash and cash equivalents $ 238 $ 592 $ 179

Receivables, net 344 308 368

Inventories, net 930 827 1,073

Prepaid expenses and other current assets 122 167 275

Total current assets 1,634 1,894 1,895

Property and equipment, net 530 561 589

Operating lease right-of-use assets 1,677 1,625 1,671

Intangible assets, net 2,024 1,986 2,171

Goodwill 1,539 1,488 1,598

Deferred tax assets 226 225 160

Other assets 173 167 309

Total assets $ 7,803 $ 7,946 $ 8,393

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable $ 558 $ 428 $ 390

Accrued payroll and payroll related 92 93 97 expenses

Accrued income taxes 39 42 27

Current operating lease liabilities 439 430 403

Short-term debt 200 167 603

Accrued expenses and other current 253 241 283 liabilities

Total current liabilities 1,581 1,401 1,803

Long-term operating lease liabilities 1,772 1,758 1,766

Deferred tax liabilities 483 465 440

Long-term debt 1,581 2,012 1,796

Other long-term liabilities 187 142 176

Total liabilities 5,604 5,778 5,981

Commitments and contingencies

Redeemable noncontrolling interest - - 4

Shareholders' equity

Ordinary shares, no par value; 650,000,000shares authorized; 218,563,307 sharesissued and 150,621,274 outstanding atSeptember 26, 2020; 217,320,010 shares - - - issued and 149,425,612 outstanding at March28, 2020 and 216,815,137 shares issued and151,633,281 outstanding at September 28,2019

Treasury shares, at cost 67,942,033 sharesat September 26, 2020, 67,894,398 shares at (3,326) (3,325) (3,225) March 28, 2020 and 65,181,856 shares atSeptember 28, 2019

Additional paid-in capital 1,126 1,085 1,060

Accumulated other comprehensive income 125 75 (103) (loss)

Retained earnings 4,274 4,332 4,673

Total shareholders' equity of Capri 2,199 2,167 2,405

Noncontrolling interest - 1 3

Total shareholders' equity 2,199 2,168 2,408

Total liabilities and shareholders' equity $ 7,803 $ 7,946 $ 8,393



SCHEDULE 3

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED SEGMENT DATA

($ in millions)

(Unaudited)

Three Months Ended Six Months Ended

September September September September 26, 28, 26, 28, 2020 2019 2020 2019

Revenue by Segment and Region:

Versace The $ 60 $ 48 $ 75 $ 92 Americas

EMEA 80 121 107 213

Asia 55 59 106 130

Versace Revenue 195 228 288 435



Jimmy Choo The 33 21 39 51 Americas

EMEA 46 64 62 143

Asia 43 40 72 89

Jimmy Choo Revenue 122 125 173 283



Michael Kors The 494 733 650 1,388 Americas

EMEA 185 224 264 413

Asia 114 132 186 269

Michael Kors Revenue 793 1,089 1,100 2,070



Total Revenue $ 1,110 $ 1,442 $ 1,561 $ 2,788



Income (loss) from Operations:

Versace $ 20 $ 9 $ (21) $ 6

Jimmy Choo - (10) (29) 1

Michael Kors 190 222 142 423

Total segment income from 210 221 92 430 operations

Less: Corporate expenses (30) (35) (61) (68)

Restructuring and other (9) (7) (17) (22) charges

Impairment of assets (20) (104) (20) (201)

COVID-19 related charges 2 - (3) -

Total Income (Loss) from $ 153 $ 75 $ (9) $ 139 Operations



Operating Margin:

Versace 10.3 % 3.9 % (7.3) % 1.4 %

Jimmy Choo - % (8.0) % (16.8) % 0.4 %

Michael Kors 24.0 % 20.4 % 12.9 % 20.4 %

Capri Operating 13.8 % 5.2 % (0.6) % 5.0 %Margin

SCHEDULE 4

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

SUPPLEMENTAL RETAIL STORE INFORMATION

(Unaudited)

As of

Retail Store Information: September 26, September 28, 2020 2019

Versace 206 198

Jimmy Choo 227 216

Michael Kors 828 850

Total number of retail stores 1,261 1,264

SCHEDULE 5

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSTANT CURRENCY DATA

(In millions)

(Unaudited)

Three Months Ended % Change

September 26, September 28, As Constant 2020 2019 Reported Currency

Total revenue:

Versace 195 $ 228 (14.5) % (18.9) %

Jimmy Choo 122 125 (2.4) % (6.4) %

Michael Kors 793 1,089 (27.2) % (27.9) %

Total revenue $ 1,110 $ 1,442 (23.0) % (24.6) %

Six Months Ended

% Change

September 26, 2020

September 28, 2019

As Reported

Constant Currency

Total revenue:

Versace

$

288

$

435

(33.8)

%

(35.6)

%

Jimmy Choo

173

283

(38.9)

%

(40.6)

%

Michael Kors

1,100

2,070

(46.9)

%

(47.1)

%

Total revenue

$

1,561

$

2,788

(44.0)

%

(44.7)

%

Six Months Ended % Change

September 26, September 28, As Constant 2020 2019 Reported Currency

Total revenue:

Versace $ 288 $ 435 (33.8) % (35.6) %

Jimmy Choo 173 283 (38.9) % (40.6) %

Michael Kors 1,100 2,070 (46.9) % (47.1) %

Total revenue $ 1,561 $ 2,788 (44.0) % (44.7) %



SCHEDULE 6

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except share and per share data)

(Unaudited)

Three Months Ended September 26, 2020

As Impairment Restructuring COVID-19 Capri As Reported Charges and Other Related Transformation Adjusted Charges ^(1) Charges

Gross profit $ 710 $ - $ - $ (9) $ - $ 701



Operating $ 557 $ (20) $ (9) $ (7) $ (2) $ 519 expenses



Total income(loss) from $ 153 $ 20 $ 9 $ (2) $ 2 $ 182 operations



Income(loss)before $ 141 $ 20 $ 9 $ (2) $ 2 $ 170 provisionforincome taxes

Provisionfor income $ 20 $ 9 $ 4 $ - $ 1 $ 34 taxes

Net income(loss)attributable $ 122 $ 11 $ 5 $ (2) $ 1 $ 137 toCapri

Diluted netincome(loss) per $ 0.81 $ 0.07 $ 0.03 $ (0.02) $ 0.01 $ 0.90 ordinaryshare -Capri

_____________________

1. Includes store closure costs which have been incorporated into the Capri Retail Store Optimization Program and other costs recorded in connection with the acquisitions of Gianni Versace S.r.l. and Jimmy Choo Group Limited.

SCHEDULE 7

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except share and per share data)

(Unaudited)

Six Months Ended September 26, 2020

As Impairment Restructuring COVID-19 Capri ERP As Reported Charges and Other Related Transformation Implementation Adjusted Charges^(1) Charges

Gross profit $ 1,012 $ - $ - $ (8) $ - $ - $ 1,004



Operating $ 1,021 $ (20) $ (17) $ (11) $ (2) $ (2) $ 969 expenses



Total (loss)income from $ (9) $ 20 $ 17 $ 3 $ 2 $ 2 $ 35 operations



(Loss)incomebefore $ (34) $ 20 $ 17 $ 3 $ 2 $ 2 $ 10 provisionforincome taxes

Provisionfor (benefit $ 25 $ 9 $ (1) $ (3) $ 1 $ (1) $ 30 from) incometaxes

Net (loss)incomeattributable $ (58) $ 11 $ 18 $ 6 $ 1 $ 3 $ (19) toCapri

Diluted net(loss)income per $ (0.39) $ 0.07 $ 0.12 $ 0.04 $ 0.01 $ 0.02 $ (0.13) ordinaryshare -Capri

______________________

1. Includes store closure costs recorded in connection with the Michael Kors Retail Fleet Optimization Plan and other restructuring initiatives, and other costs recorded in connection with the acquisitions of Gianni Versace S.r.l. and Jimmy Choo Group Limited.

SCHEDULE 8

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except share and per share data)

(Unaudited)

Three Months Ended September 28, 2019

Restructuring Inventory Acquisition As Impairment and Other Step-up ERP Capri Foreign As Reported Charges Charges ^(1) Adjustment Implementation Transformation Currency Adjusted Effects

Gross profit $ 874 $ - $ - $ 5 $ - $ - $ - $ 879



Operating $ 799 $ (104) $ (7) $ - $ (9) $ (2) $ - $ 677 expenses



Versaceoperating $ 9 $ - $ - $ 5 $ - $ - $ - $ 14 income

Total income $ 75 $ 104 $ 7 $ 5 $ 9 $ 2 $ - $ 202 from operations



Foreigncurrency loss $ 4 $ - $ - $ - $ - $ - $ (1) $ 3 (gain)

Income beforeprovision for $ 69 $ 104 $ 7 $ 5 $ 9 $ 2 $ 1 $ 197 income taxes

(Benefit from)provision for $ (4) $ 18 $ 2 $ 1 $ 2 $ 1 $ - $ 20 income taxes

Net incomeattributable to $ 73 $ 86 $ 5 $ 4 $ 7 $ 1 $ 1 $ 177 Capri

Diluted netincome perordinary share $ 0.47 $ 0.56 $ 0.03 $ 0.03 $ 0.05 $ 0.01 $ 0.01 $ 1.16 -Capri

______________________

1. Includes store closure costs recorded in connection with the Michael Kors Retail Fleet Optimization Plan and other restructuring initiatives, and other costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited.

SCHEDULE 9

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except share and per share data)

(Unaudited)

Six Months Ended September 28, 2019

Restructuring Inventory Acquisition As Reported Impairment and Other Step-up ERP Capri Foreign As Adjusted Charges Charges^(1) Adjustment Implementation Transformation Currency Effects

Gross profit $ 1,708 $ - $ - $ 11 $ - $ - $ - $ 1,719



Total operating expenses $ 1,569 $ (201) $ (22) $ - $ (17) $ (2) $ - $ 1,327



Versace operating income $ 6 $ - $ - $ 11 $ - $ - $ - $ 17

Total income from $ 139 $ 201 $ 22 $ 11 $ 17 $ 2 $ - $ 392 operations



Foreign currency loss $ 6 $ - $ - $ - $ - $ - $ (1) $ 5 (gain)

Income before provision for $ 120 $ 201 $ 22 $ 11 $ 17 $ 2 $ 1 $ 374 income taxes

Provision for income taxes $ 2 $ 37 $ 5 $ 3 $ 4 $ 1 $ - $ 52

Net income attributable to $ 118 $ 164 $ 17 $ 8 $ 13 $ 1 $ 1 $ 322 Capri

Weighted average dilutedordinary shares 152,455,218 - - - - - - 152,455,218 outstanding

Diluted net income perordinary share - $ 0.77 $ 1.08 $ 0.11 $ 0.05 $ 0.08 $ 0.01 $ 0.01 $ 2.11 Capri

______________________

1. Includes store closure costs recorded in connection with the Michael Kors Retail Fleet Optimization Plan and other restructuring initiatives, and other costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105005356/en/

CONTACT: Investor Relations: Jennifer Davis (201) 514-8234 Jennifer.Davis@CapriHoldings.com Media: Dinesh Kandiah (917) 934-2427 Press@CapriHoldings.com