Business Wire | Aug 5, 2020 06:35AM EDT

Capri Holdings Limited Announces First Quarter Fiscal 2021 Results

Aug. 05, 2020

LONDON--(BUSINESS WIRE)--Aug. 05, 2020--Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the first quarter of fiscal 2021 ended June 27, 2020.

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VERSACE (Photo: Business Wire)

First Quarter Fiscal 2021 Highlights

* First quarter revenue decline of 66.5%, better than the company's initial expectation * First quarter adjusted gross margin expansion of 480 basis points versus prior year * First quarter adjusted loss per share of $1.04 * Ended the first quarter with approximately $1.1 billion of liquidity

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 as our stores continue to reopen around the globe. 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, "Looking at our progress in the fiscal first quarter, we were encouraged by trends across all three of our luxury houses, with sales and margin performance ahead of our initial expectations. We were particularly pleased with the strong growth of our eCommerce business, as well the sequential improvement in overall revenue trends through the first quarter and into July."

Mr. Idol concluded, "During these unprecedented times, we plan to continue to execute on our strategic growth initiatives and remain confident in the long-term opportunities for each of our unique global luxury houses. Capri Holdings has a portfolio of three iconic, founder-led fashion luxury brands that have enduring value and a long history of successfully navigating challenging periods. We will continue to carefully guide our business through the current retail environment, while positioning the company to resume its growth trajectory in fiscal 2022."

First 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 First Quarter Fiscal 2021 Results:

* Total revenue of $451 million decreased 66.5% compared to last year. On a constant currency basis, total revenue decreased 66.2%. * Gross profit was $302 million and gross margin was 67.0%, compared to $834 million and 62.0% in the prior year. Adjusted gross profit was $303 million and adjusted gross margin was 67.2%, compared to $840 million and 62.4% in the prior year. * Loss from operations was $162 million and operating margin was (35.9)% compared to income of $64 million and operating margin of 4.8% in the prior year. Adjusted loss from operations was $147 million and operating margin was (32.6)%, compared to operating income of $190 million and 14.1% in the prior year. * Net loss was $180 million, or $(1.21) per diluted share compared to net income of $45 million, or $0.30 per diluted share in the prior year. Adjusted net loss was $156 million, or $(1.04) per diluted share, compared to income of $145 million or $0.95 per diluted share. * Net inventory at June 27, 2020 was $948 million, a 7% decrease compared to the prior year.

Versace First Quarter Fiscal 2021 Results:

* Versace revenue of $93 million decreased 55.1% compared to the prior year. On a constant currency basis, total revenue decreased 54.1%. * Versace operating loss was $41 million and operating margin was (44.1)% compared to an operating loss of $3 million and operating margin of (1.4)% in the prior year. Last year, adjusted operating income was $3 million and adjusted operating margin was 1.4%.

Jimmy Choo First Quarter Fiscal 2021 Results:

* Jimmy Choo revenue of $51 million decreased 67.7% compared to the prior year on a reported and constant currency basis. * Jimmy Choo operating loss was $29 million and operating margin was (56.9)%, compared to operating income of $11 million and operating margin of 7.0% in the prior year.

Michael Kors First Quarter Fiscal 2021 Results:

* Michael Kors revenue of $307 million decreased 68.7% compared to the prior year. On a constant currency basis, total revenue decreased 68.5%. * Michael Kors operating loss was $48 million and operating margin was (15.6)%, compared to operating income of $201 million and operating margin of 20.5% in the prior year.

Fiscal Year 2021 Outlook

Due to the lack of visibility surrounding the pandemic, macroeconomic fundamentals and tourism, the impacts on our financial and operating results cannot reasonably be estimated at this time. Therefore, the company is not providing earnings guidance for its fiscal year 2021.

Conference Call Information

A conference call to discuss first quarter fiscal 2021 results is scheduled for today, August 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 August 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 10010472. A replay of the webcast will also be available within two hours of the conclusion of the call.

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

June 27, June 29, 2020 2019

Total revenue $ 451 $ 1,346

Cost of goods sold 149 512

Gross profit 302 834

Total operating expenses 464 770

(Loss) income from operations (162 ) 64

Other income, net (1 ) (2 )

Interest expense, net 17 13

Foreign currency (gain) loss (3 ) 2

(Loss) income before provision for income (175 ) 51 taxes

Provision for income taxes 5 6

Net (loss) income attributable to Capri $ (180 ) $ 45

Weighted average ordinary shares outstanding:

Basic 149,556,310 151,049,572

Diluted 149,556,310 152,334,153

Net (loss) income per ordinary share:

Basic $ (1.21 ) $ 0.30

Diluted $ (1.21 ) $ 0.30

SCHEDULE 2

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

June 27, March 28, June 29, 2020 2020 2019

Assets

Current assets

Cash and cash equivalents $ 207 $ 592 $ 160

Receivables, net 183 308 310

Inventories, net 948 827 1,016

Prepaid expenses and other current 151 167 337 assets

Total current assets 1,489 1,894 1,823

Property and equipment, net 541 561 608

Operating lease right-of-use assets 1,641 1,625 1,718

Intangible assets, net 1,977 1,986 2,250

Goodwill 1,490 1,488 1,652

Deferred tax assets 226 225 111

Other assets 169 167 221

Total assets $ 7,533 $ 7,946 $ 8,383

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable $ 596 $ 428 $ 355

Accrued payroll and payroll related 94 93 96 expenses

Accrued income taxes 34 42 36

Current operating lease liabilities 431 430 408

Short-term debt 191 167 514

Accrued expenses and other current 243 241 372 liabilities

Total current liabilities 1,589 1,401 1,781

Long-term operating lease liabilities 1,751 1,758 1,754

Deferred tax liabilities 465 465 437

Long-term debt 1,577 2,012 1,917

Other long-term liabilities 144 142 210

Total liabilities 5,526 5,778 6,099

Commitments and contingencies

Redeemable noncontrolling interest - - 4

Shareholders' equity

Ordinary shares, no par value;650,000,000 shares authorized; 218,272,709 shares issued and 150,340,192 outstanding at June 27, 2020; 217,320,010 shares - - - issued and 149,425,612 outstanding at March 28, 2020 and 216,742,279 shares issued and 151,565,342 outstanding at June 29,2019

Treasury shares, at cost 67,932,517 shares at June 27, 2020,67,894,398 shares at March 28, 2020 and 65,176,937 shares atJune 29, 2019 (3,326 ) (3,325 ) (3,225 )

Additional paid-in capital 1,109 1,085 1,040

Accumulated other comprehensive income 71 75 (93 )(loss)

Retained earnings 4,152 4,332 4,555

Total shareholders' equity of Capri 2,006 2,167 2,277

Noncontrolling interest 1 1 3

Total shareholders' equity 2,007 2,168 2,280

Total liabilities and shareholders' $ 7,533 $ 7,946 $ 8,383 equity

SCHEDULE 3

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED SEGMENT DATA

($ in millions)

(Unaudited)

Three Months Ended

June 27, June 29, 2020 2019

Revenue by Segment and Region:

Versace The Americas $ 15 $ 44

EMEA 27 92

Asia 51 71

Versace Revenue 93 207



Jimmy Choo The Americas 6 30

EMEA 16 79

Asia 29 49

Jimmy Choo Revenue 51 158



Michael Kors The Americas 156 655

EMEA 79 189

Asia 72 137

Michael Kors Revenue 307 981



Total Revenue $ 451 $ 1,346



(Loss) Income from Operations:

Versace $ (41 ) $ (3 )

Jimmy Choo (29 ) 11

Michael Kors (48 ) 201

Total segment income from operations (118 ) 209

Less: Corporate expenses (31 ) (33 )

Restructuring and other charges (8 ) (15 )

Impairment of assets - (97 )

COVID-19 related charges (5 ) -

Total (Loss) Income from Operations $ (162 ) $ 64



Operating Margin:

Versace (44.1 )% (1.4 )%

Jimmy Choo (56.9 )% 7.0 %

Michael Kors (15.6 )% 20.5 %

Capri Operating Margin (35.9 )% 4.8 %

SCHEDULE 4

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES SUPPLEMENTAL RETAIL STORE INFORMATION(Unaudited) As ofRetail Store Information: June 27, June 29, 2020 2019

Versace 204 196

Jimmy Choo 228 215

Michael Kors 822 853

Total number of retail stores 1,254 1,264

SCHEDULE5

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSTANT CURRENCY DATA

(In millions)

(Unaudited)

Three Months Ended % Change

June 27, June 29, As Constant 2020 2019 Reported Currency

Total revenue:

Versace 93 $ 207 (55.1 )% (54.1 )%

Jimmy Choo 51 158 (67.7 )% (67.7 )%

Michael Kors 307 981 (68.7 )% (68.5 )%

Total revenue $ 451 $ 1,346 (66.5 )% (66.2 )%

SCHEDULE 6

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In millions, except share and per share data)

(Unaudited)

Three Months Ended June 27, 2020

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

Gross profit $ 302 $ - $ 1 $ - $ 303



Operating $ 464 $ (8 ) $ (4 ) $ (2 ) $ 450 expenses



Total lossfrom $ (162 ) $ 8 $ 5 $ 2 $ (147 )operations



Loss beforeprovision $ (175 ) $ 8 $ 5 $ 2 $ (160 )for income taxes

Provisionfor (benefit $ 5 $ (5 ) $ (3 ) $ (1 ) $ (4 )from) income taxes

Net lossattributable $ (180 ) $ 13 $ 8 $ 3 $ (156 )to Capri

Diluted netloss perordinary $ (1.21 ) $ 0.09 $ 0.06 $ 0.02 $ (1.04 )share -Capri

(1) Includes store closure costs which have been incorporated into the CapriRetail Store Optimization Program and other costs recorded in connection withthe 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)

Three Months Ended June 29, 2019

Restructuring Inventory and Other Step-up Impairment Charges ^(1) Adjustment ERP As Charges Implementation As Reported Adjusted

Gross profit $ 834 $ - $ - $ 6 $ - $ 840



Operating $ 770 $ (97 ) $ (15 ) $ - $ (8 ) $ 650expenses



Versaceoperating $ (3 ) $ - $ - $ 6 $ - $ 3(loss) income

Total incomefrom $ 64 $ 97 $ 15 $ 6 $ 8 $ 190operations



Incomebeforeprovision $ 51 $ 97 $ 15 $ 6 $ 8 $ 177for incometaxes

Provisionfor income $ 6 $ 19 $ 3 $ 2 $ 2 $ 32taxes

Net incomeattributable $ 45 $ 78 $ 12 $ 4 $ 6 $ 145to Capri

Diluted netincome perordinary $ 0.30 $ 0.51 $ 0.08 $ 0.02 $ 0.04 $ 0.95share -Capri

(1) Includes store closure costs recorded in connection with the Michael KorsRetail Fleet Optimization Plan and other restructuring initiatives, and othercosts recorded in connection with the acquisitions of Gianni Versace S.r.l andJimmy Choo Group Limited.

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CONTACT: Investor Relations: Jennifer Davis (201) 514-8234 Jennifer.Davis@CapriHoldings.com

CONTACT: Media: Dinesh Kandiah (917) 934-2427 Press@CapriHoldings.com