Capri Holdings Limited Announces Fourth Quarter and Full Year Fiscal 2022 Results

Achieved Highest Revenue, Gross Margin and EPS Levels in the Company's History

Authorized New $1 Billion Share Repurchase Program

http://www.capriholdings.com/4Q22Presentation

Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the fourth quarter and full year fiscal 2022 ended April 2, 2022.

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Versace (Photo: Business Wire)

Fourth Quarter Fiscal 2022 Highlights

• Revenue increased 24.6%, with better than anticipated results across all three luxury houses
• Adjusted gross margin expanded 20 basis points versus prior year
• Adjusted operating margin expansion of 230 basis points to 14.2%
• Adjusted earnings per share of $1.02

John D. Idol, the Company’s Chairman and Chief Executive Officer, said, "Looking back on fiscal 2022, I am proud of the progress we made across all our luxury houses. Revenue and earnings results significantly exceeded our original expectations. Capri Holdings achieved the highest revenue, gross margin and earnings per share in the company’s history. Additionally, we generated strong free cash flow and returned $650 million to shareholders in fiscal 2022. Our ability to deliver record results while navigating the challenges of an unprecedented global pandemic is a testament to the strength of our brands and the success of our strategic growth initiatives. Most importantly, we would not have been able to achieve these results if not for the hard work, dedication and resiliency of our teams across the globe."

Mr. Idol continued, "Looking forward in fiscal 2023 we expect to achieve another year of record revenue and earnings per share. Longer term we are confident in our ability to resume double digit revenue increases as we move beyond the impact of current macro headwinds. The power of Versace, Jimmy Choo and Michael Kors as well as the proven resilience of the luxury market reinforce our optimism for the future and our ability to achieve $7 billion in revenue and a 20% operating margin over time."

Fourth Quarter Fiscal 2022 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 revenue compared to the same period in the prior year.

Overview of Capri Holdings Fourth Quarter Fiscal 2022 Results

The Company noted that fiscal year 2022 had 53 weeks versus 52 weeks in fiscal year 2021. As a result, the Company's results for the fiscal 2022 fourth quarter and fiscal year ended April 2, 2022, include approximately $70 million in sales related to the 53rd week.

• Total revenue of $1.492 billion increased 24.6% compared to last year. On a constant currency basis, total revenue increased 28.4%. On a 13-week basis, total revenue increased 18.8%.
• Gross profit was $956 million and gross margin was 64.1%, compared to $737 million and 61.6% in the prior year. Adjusted gross profit was $951 million and adjusted gross margin was 63.7%, compared to $760 million and 63.5% in the prior year.
• Income from operations was $119 million and operating margin was 8.0% compared to a loss of $139 million and operating margin of (11.6)% in the prior year. Adjusted income from operations was $212 million and operating margin was 14.2%, compared to $143 million and 11.9% in the prior year.
• Net income was $81 million, or $0.54 per diluted share, compared to a net loss of $183 million, or $(1.21) per diluted share, in the prior year. Adjusted net income was $152 million, or $1.02 per diluted share, compared to $59 million, or $0.38 per diluted share, in the prior year.
• Net inventory at April 2, 2022 was $1.096 billion, a 48.9% increase compared to the prior year. This increase was in line with management's expectations reflecting the Company's new programs to receive seasonal merchandise earlier as well as hold more core inventory.

Versace Fourth Quarter Fiscal 2022 Results

• Versace revenue of $315 million increased 34.0% compared to the prior year. On a constant currency basis, total revenue increased 44.3%.
• Versace operating income was $50 million and operating margin was 15.9% compared to an operating income of $29 million and operating margin of 12.3% in the prior year.

Jimmy Choo Fourth Quarter Fiscal 2022 Results

• Jimmy Choo revenue of $156 million increased 25.8% compared to the prior year. On a constant currency basis, total revenue increased 29.1%.
• Jimmy Choo operating loss was $15 million and operating margin was (9.6)%, compared to operating loss of $18 million and operating margin of (14.5)% in the prior year.

Michael Kors Fourth Quarter Fiscal 2022 Results

• Michael Kors revenue of $1.021 billion increased 21.8% compared to the prior year. On a constant currency basis, total revenue increased 23.8%.
• Michael Kors operating income was $210 million and operating margin was 20.6%, compared to operating income of $172 million and operating margin of 20.5% in the prior year.

Share Repurchase Authorization

During the fourth quarter, the Company repurchased approximately 5.1 million ordinary shares for approximately $300 million in open market transactions.

On June 1, 2022, the Company’s Board of Directors approved a new share repurchase program of up to $1 billion of its outstanding ordinary shares, providing additional capacity to return cash to shareholders over the longer term. This new two-year program will replace the Company’s existing $1 billion share repurchase program which had $500 million of availability remaining.

Outlook

The following guidance is provided on an adjusted, non-GAAP basis. Due to the ongoing dynamic nature of the COVID-19 pandemic, financial results could differ materially from the current outlook due to a number of external events which are not reflected in our guidance, including any significant additional store closures or new government restrictions that could further impact traffic and sales trends as well as any greater supply chain disruptions that could further extend inventory delays or increase transportation expenses.

Fiscal Year 2023 Outlook

For Capri Holdings, the Company expects the following:

• Total revenue of approximately $5.95 billion, increasing approximately 5% versus prior year on a reported basis and approximately 10% in constant currency
• Gross margin approximately flat to fiscal year 2022, reflecting benefits from strategic initiatives offset by higher transportation and input costs
• Operating margin of approximately 18%
• Net interest income of approximately $35 million
• Effective tax rate of approximately 11%
• Weighted average diluted shares outstanding of approximately 144 million
• Diluted earnings per share of approximately $6.85
• Capital expenditures of approximately $300 million

For Versace, the Company expects the following:

• Total revenue of approximately $1.225 billion, increasing approximately 13% on a reported basis and approximately 23% in constant currency
• Operating margin of approximately 16%

For Jimmy Choo, the Company expects the following:

• Total revenue of approximately $650 million, increasing approximately 6% on a reported basis and approximately 9% in constant currency
• Operating margin of approximately 5%

For Michael Kors, the Company expects the following:

• Total revenue of approximately $4.075 billion, increasing approximately 3% on a reported basis and approximately 6% in constant currency
• Operating margin of approximately 24%

First Quarter Fiscal 2023 Outlook

For Capri Holdings, the Company expects the following:

• Total revenue of approximately $1.3 billion, increasing approximately 4% versus prior year on a reported basis and approximately 9% in constant currency
• Operating margin of approximately 16.5%
• Net interest income of approximately $9 million
• Effective tax rate of approximately 12%
• Weighted average diluted shares outstanding of approximately 146 million
• Diluted earnings per share of approximately $1.35

For Versace, the Company expects the following:

• Total revenue of approximately $265 million, increasing approximately 11% on a reported basis and approximately 20% in constant currency
• Operating margin in the low double digit range

For Jimmy Choo, the Company expects the following:

• Total revenue of approximately $155 million, increasing approximately 9% on a reported basis and approximately 13% in constant currency
• Operating margin in the mid single digit range

For Michael Kors, the Company expects the following:

• Total revenue of approximately $880 million, increasing approximately 1% on a reported basis and approximately 5% in constant currency
• Operating margin in the low to mid 20% range

Fiscal Year 2023 Quarterly Outlook

For Capri Holdings, the Company expects the following:

Conference Call Information

A conference call to discuss fourth quarter and full year fiscal 2022 results is scheduled for today, June 1, 2022 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 June 8, 2022. 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 13729782. A replay of the webcast will also be available within two hours of the conclusion of the call and will remain on the website for 90 days. Additionally, a fourth quarter fiscal 2022 earnings highlights presentation is posted on the company's website.

Investor Meeting

The Company will host an Investor Meeting on Wednesday, July 20, 2022. Additional details about the event will be included in a subsequent announcement.

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, charitable donations and the war in Ukraine. 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 impact of 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 and to successfully execute our growth strategies; the risk of disruptions to the Company’s businesses; risks associated with operating in international markets and our global sourcing activities, including disruptions or delays in manufacturing or shipments; the risk of cybersecurity threats and privacy of data security breaches; 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; high consumer debt levels, recession and inflationary pressures; 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; extreme weather conditions and natural disasters; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions including acts of war and other geopolitical conflicts; as well as those risks set forth in the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended March 27, 2021 (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.

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