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Capri Holdings Limited Announces First Quarter Fiscal 2021 Results

August 5, 2020 6:35 AM



Q1 2021 Earnings Presentation

LONDON--(BUSINESS WIRE)-- 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.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200805005384/en/

VERSACE (Photo: Business Wire)

VERSACE (Photo: Business Wire)

First Quarter Fiscal 2021 Highlights

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:

Versace First Quarter Fiscal 2021 Results:

Jimmy Choo First Quarter Fiscal 2021 Results:

Michael Kors First Quarter Fiscal 2021 Results:

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,
2020

June 29,
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 taxes

(175

)

51

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,
2020

March 28,
2020

June 29,
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 assets

151

167

337

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 expenses

94

93

96

Accrued income taxes

34

42

36

Current operating lease liabilities

431

430

408

Short-term debt

191

167

514

Accrued expenses and other current liabilities

243

241

372

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 at
June 29, 2019

(3,326

)

(3,325

)

(3,225

)

Additional paid-in capital

1,109

1,085

1,040

Accumulated other comprehensive income (loss)

71

75

(93

)

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’ equity

$

7,533

$

7,946

$

8,383

SCHEDULE 3

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED SEGMENT DATA

($ in millions)

(Unaudited)

Three Months Ended

June 27,
2020

June 29,
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 of

Retail Store Information:

June 27,
2020

June 29,
2019

Versace

204

196

Jimmy Choo

228

215

Michael Kors

822

853

Total number of retail stores

1,254

1,264

SCHEDULE 5

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSTANT CURRENCY DATA

(In millions)

(Unaudited)

Three Months Ended

% Change

June 27,
2020

June 29,
2019

As
Reported

Constant
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

As
Reported

Restructuring
and Other
Charges (1)

COVID-19
Related
Charges

ERP
Implementation

As
Adjusted

Gross profit

$

302

$

—

$

1

$

—

$

303

Operating expenses

$

464

$

(8

)

$

(4

)

$

(2

)

$

450

Total loss from operations

$

(162

)

$

8

$

5

$

2

$

(147

)

Loss before provision for income taxes

$

(175

)

$

8

$

5

$

2

$

(160

)

Provision for (benefit from) income taxes

$

5

$

(5

)

$

(3

)

$

(1

)

$

(4

)

Net loss attributable to Capri

$

(180

)

$

13

$

8

$

3

$

(156

)

Diluted net loss per ordinary share - Capri

$

(1.21

)

$

0.09

$

0.06

$

0.02

$

(1.04

)

(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)

Three Months Ended June 29, 2019

As Reported

Impairment
Charges

Restructuring
and Other
Charges (1)

Inventory
Step-up Adjustment

ERP
Implementation

As
Adjusted

Gross profit

$

834

$

—

$

—

$

6

$

—

$

840

Operating expenses

$

770

$

(97

)

$

(15

)

$

—

$

(8

)

$

650

Versace operating (loss) income

$

(3

)

$

—

$

—

$

6

$

—

$

3

Total income from operations

$

64

$

97

$

15

$

6

$

8

$

190

Income before provision for income taxes

$

51

$

97

$

15

$

6

$

8

$

177

Provision for income taxes

$

6

$

19

$

3

$

2

$

2

$

32

Net income attributable to Capri

$

45

$

78

$

12

$

4

$

6

$

145

Diluted net income per ordinary share - Capri

$

0.30

$

0.51

$

0.08

$

0.02

$

0.04

$

0.95

(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.

Investor Relations:

Jennifer Davis (201) 514-8234

[email protected]

Media:

Dinesh Kandiah (917) 934-2427

[email protected]

Source: Capri Holdings Limited

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