The following excerpt is from the company's SEC filing.
London — February 8, 2023 —
Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the third quarter of Fiscal 2023 ended December 31, 2022.
Third Quarter Fiscal 2023 Highlights
6.0% on a reported basis and 0.5% in constant currency
Adjusted operating margin o
Adjusted earnings per share o
John D. Idol, the Company's Chairman and Chief Executive Officer, said, "Overall, our performance in the third quarter was more challenging than anticipated. However, many aspects of our business performed well, in pa rticular we were pleased with the continued growth in our own retail channel across all three of our luxury houses. This is a testament to the strength of our powerful iconic brands, as well as the success of our strategic initiatives."
Mr. Idol continue
d, "However, we were disappointed with the performance of our global wholesale business in the quarter which resulted in expense deleverage and a lower operating margin. We have begun taking measures to better align operating expenses with the change in revenue by channel. At the same time we will continue to make strategic investments to drive long term growth."
Mr. Idol concluded, "As we look to fiscal 2024 we expect Capri Holdings to generate mid-single-digit revenue and earnings growth.
We remain confident in our ability to achieve our long-term goals over time due to the resilience of the luxury industry, the strength of our portfolio of luxury houses and the talented group of employees executing our strategic initiatives."
Third Quarter Fiscal 2023 Results
Financial Results and non-GAAP Reconciliation
pany’s results are reported in this press release in accordance with accounting principles generally accepted in the United States ("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.
Overview of Capri Holdings
Total revenue of $1.51 billion decreased 6.0% compared to last year. On a constant currency basis, total revenue decreased 0.5%.
Gross profit was $1.01 billion and gross margin was 66.5%, c
ompared to $1.05 billion and 65.1% in the prior year. Adjusted gross profit wa
s $1.00 billion a
nd adjusted gross margin was
, compared to $1.05 billion and 65.1% in the prior year.
Income from operations w
s $236 million a
nd operating margin w
compared to $331 million and 20.6% in the prior year. Adjusted income from operations was
$256 million an
d operating margin wa
s 16.9%, c
ompared to $359 million and 22.3% in the prior year.
Net income wa
s $225 million,
r $1.72 p
er diluted share, compared to $322 million, or $2.11 per diluted share, in the prior year. Adjusted net income wa
s $240 million, or $1.84 per diluted share, compared to $339 million, or $2.22 per diluted share, in the prior year.
Net inventory as of December 31, 2022 w
as $1.188 billion, a 21% increase com
pared to the prior year. This represents a sequential improvement and management continues to expect inventory levels to be below prior year by the end of the fourth quarter.
Versace Third Quarter Fiscal 2023 Results:
evenue of $249 million decreased 0.8% c
ompared to the prior year. On a constant currency basis, total reve
nue increased 11.2%.
Versace operating income wa
s $24 million and
operating margin was
mpared to $32 million and 12.7% in the prior year.
Jimmy Choo Third Quarter Fiscal 2023 Results:
Jimmy Choo revenue of
$168 million decreased 5.6% compared to the prior year. On a constant currency basis, total revenue increased 3.4%.
Jimmy Choo operating income
was $18 million and operating margin was 10.7%, co
mpared to $16 million and 9.0% in the prior year.
Michael Kors Third Quarter Fiscal 2023 Results:
Michael Kors revenue of
$1.095 billion decreased 7.2% c
enue decreased 3.6%.
Michael Kors operating income w
as $251 million and operating margin was 22.9%, co
mpared to $335 million and 28.4% in the
During the third quarter, the Company repurchased approximately 5.7 million ordinary shares for approximately $300 million in open market transactions.
The following guidance is provided on a
n adjusted, non-GAAP basis. Financial results could differ materially from the current outlook due to a number of external events which are not reflected in our guidance, including changes in global macroeconomic conditions, greater than anticipated inflationary pressures, further considerable fluctuations in foreign currency exchange rates, COVID-19 variants and other COVID related disruptions
Fiscal Year 2023 Outlook
For Capri Holdings, the Company expects the following:
Total revenue of approximately $5.56 billion
Modest gross margin expansion
Operating margin of approximately 16.0%
Net interest expense and foreign currency gains of approximately $12 million
Effective tax rate of approximately 7%
Weighted average diluted shares outstanding of approximately 134 million
Diluted earnings per share of approximately $6.10
Ending inventory to be below prior year
For Versace, the Company expects the following:
Total revenue of approximately $1.1 billion
Operating margin of approximately 15%
For Jimmy Choo, the Company expects the following:
Total revenue of approximately $610 million
Operating margin of approximately 4%
For Michael Kors, the Company expects the following:
Total revenue of approximately $3.83 billion
Operating margin of approximately 22%
Fourth Quarter Fiscal 2023 Outlook
Total revenue of approximately $1.275 billion
Operating margin of approximately 8.5%
Net interest expense of approximately $11 million
Effective tax rate of approximately (20)%
Weighted average diluted shares outstanding of approximately 126 million
Diluted earnings per share of $0.90-$0.95
Total revenue of approximately $280 million
Operating margin of approximately 10%
Total revenue of approximately $130 million
Operating margin of approximately (14)%
Total revenue of approximately $865 million
Fiscal Year 2024 Outlook
Total revenue of approximately $5.8 billion
Operating margin of approximately 16.5%
Effective tax rate in the mid-teens range
Diluted earnings per share of approximately $6.40
Total revenue of approximately $1.25 billion
Operating margin in the mid-teens range
Total revenue of approximately $650 million
Operating margin in the high-single-digit range
Total revenue of approximately $3.9 billion
Operating margin in the low-20% range
Conference Call Information
A conference call to discuss third quarter Fiscal 2023 results is scheduled for today, February 8, 2023 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 February 15, 2023. 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 13735207. 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 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, the impact of the war in Ukraine, ERP implementation costs, Capri transformation costs, impairment charges, 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 is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors. Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands. We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories. Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve. Capri Holdings Limited is publicly listed on the New York Stock Exchange under the ticker CPRI.
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; changes in consumer traffic and retail trends; high consumer debt levels, recession and inflationary pressures; 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; 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 April 2, 2022 (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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CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share data)
Three Months Ended
Nine Months Ended
Cost of goods sold
Total operating expenses
Other income, net
Interest expense (income), net
Foreign currency (gain) loss
Income before income taxes
Provision for income taxes
Less: Net income attributable to noncontrolling interest
Net income attributable to Capri
Weighted average ordinary shares outstanding:
Net income per ordinary share:
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
Cash and cash equivalents
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Deferred tax assets
Liabilities and Shareholders’ Equity
Accrued payroll and payroll related expenses
Accrued income taxes
Short-term operating lease liabilities
Accrued expenses and other current liabilities
Total current liabilities
Long-term operating lease liabilities
Deferred tax liabilities
Other long-term liabilities
Commitments and contingencies
Ordinary shares, no par value; 650,000,000 shares authorized; 223,781,728 shares issued and 125,398,217 outstanding at December 31, 2022; 221,967,599 shares issued and 142,806,269 outstanding at April 2, 2022 and 221,322,510 shares issued and 147,252,018 outstanding at December 25, 2021
Treasury shares, at cost (98,383,511 shares at December 31, 2022, 79,161,330 shares at April 2, 2022 and 74,070,492 shares at December 25, 2021)
Additional paid-in capital
Accumulated other comprehensive income
Total shareholders’ equity of Capri
Total liabilities and shareholders’ equity
CONSOLIDATED SEGMENT DATA
($ in millions)
Revenue by Segment and Region:
Jimmy Choo Revenue
Michael Kors Revenue
Income from Operations:
Total segment income from operations
Less: Corporate expenses
Impairment of assets
Restructuring and other charges
Impact of war in Ukraine
Total Income from Operations
Capri Operating Margin
SUPPLEMENTAL RETAIL STORE INFORMATION
Retail Store Information:
Total number of retail stores
CONSTANT CURRENCY DATA
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In millions, except per share data)
Three Months Ended December 31, 2022
Restructuring and Other Charges
COVID-19 Related Charges
War in Ukraine
Total income from operations
Income before provision for income taxes
Diluted net income per ordinary share - Capri
Primarily Includes other charges recorded in connection with the acquisition of Gianni Versace S.r.l.
Nine Months Ended December 31, 2022
Three Months Ended December 25, 2021
Includes store closure costs which have been incorporated into the Capri Retail Store Optimization Program, other restructuring initiatives, and other costs recorded in connection with the acquisitions of Gianni Versace S.r.l and Jimmy Choo Group Limited.
Nine Months Ended December 25, 2021
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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