What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-02-02 · 142 added, 281 removed, 243 unchanged (64% of the section changed)

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All statements other than statements of historical facts included herein, may be forward-looking statements.

Forward-looking statements include information concerning the Company’s goals, future plans and strategies, including with respect to ESG goals, initiatives and ambitions as well as the Company’s possible or assumed future results of operations, including descriptions of its business strategy.

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.

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changes in consumer traffic and retail trends;

loss of market share and industry competition;

higher consumer debt levels, recession and inflationary pressures, loss of market share and industry competition;

fluctuations in the capital markets;

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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, as well as those risks set forth in Item 1A.

“Risk Factors” in our Annual Report on Form 10-K for the year ended March 27, 2021, filed with the Securities and Exchange Commission on May 26, 2021.

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 Item 1A.

“Risk Factors” in our Annual Report on Form 10-K for the year ended April 2, 2022, filed with the Securities and Exchange Commission on June 1, 2022.

Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design, style and craftsmanship, led by a world-class management team and renowned designers.

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Jimmy Choo is represented through its global store network, its e-commerce sites, as well as through the most prestigious department and specialty stores worldwide.

Our Michael Kors brand was launched 40 years ago by Michael Kors, whose vision has taken the Company from its beginnings as an American luxury sportswear house to a global accessories, footwear and ready-to-wear company with a global distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites, leading department stores, specialty stores and select licensing partners.

Our Michael Kors brand was launched over 40 years ago by Michael Kors, whose vision has taken the Company from its beginnings as an American luxury sportswear house to a global accessories, footwear and ready-to-wear company with a global distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites, leading department stores, specialty stores and select licensing partners.

Michael Kors is a highly recognized luxury fashion brand in the Americas and Europe with growing brand awareness in other international markets.

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COVID-19 Pandemic.

See Item 1A — “The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations” of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for additional discussion regarding risks to our business associated with the COVID-19 pandemic.

Channel shift, macroeconomic factors, and demand for our accessories and related merchandise .

See Item 1A — “The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations” of our Annual Report on Form 10-K for the fiscal year ended April 2, 2022 for additional discussion regarding risks to our business associated with the COVID-19 pandemic.

Macroeconomic conditions and inflationary pressures.

Our business is affected by global economic conditions and the related impact on levels of consumer spending worldwide.

The war in Ukraine that began in February 2022 has created significant economic uncertainty in the region and caused the Company to pause all wholesale shipments to Russia and Ukraine.

While our business in Russia and Ukraine represented less than 1% of our total net sales for Fiscal 2022, the war has caused broader macroeconomic implications that we expect to continue for the foreseeable future, including the continued weakening of the Euro against the US dollar, increases in fuel prices, volatility in the financial markets and a decline in consumer spending which may negatively impact our business, financial condition, and results of operations for Fiscal 2023.

In addition, inflationary pressures, including increased labor, raw materials, and freight costs, adversely impacted our earnings in the first quarter of 2023.

Purchases of discretionary luxury items, such as the accessories, footwear and apparel that we produce, tend to decline when disposable income is lower or when there are recessions, inflationary pressures or other economic uncertainty.

Luxury goods trends and demand for our accessories and related merchandise .

Our performance is affected by trends in the luxury goods industry, global consumer spending, macroeconomic factors, overall levels of consumer travel and spending on discretionary items as well as shifts in demographics and changes in lifestyle preferences.

Through 2019, the personal luxury goods market grew at a 5% rate over the past 20 years, with more recent growth driven by stronger Chinese demand from both international and local consumers and demographic and socioeconomic shifts resulting in younger consumers purchasing more luxury goods.

Through 2019, the personal luxury goods market grew at a mid-single digit rate over the past 20 years.

However, in 2020, due to the impact of the COVID-19 crisis, the personal luxury goods market declined 22%.

Market studies indicate that the personal luxury goods market is predicted to increase at a 10% compound annual growth rate between 2020 and 2025, and is expected to have returned to 2019 levels by the end of 2021 or in 2022.

The personal luxury goods market experienced a strong rebound in 2021, with sales exceeding pre-pandemic levels.

Market studies forecast the personal luxury goods industry will increase at low-double-digit compound annual growth rate between 2020 and 2025.

Future growth is expected to be driven by e-commerce, Chinese consumers and younger generations.

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In our view, increased customer engagement and tailoring merchandise to customer shopping and communication preferences are key to growing market share.

Retail Fleet Optimization .

We also continue to adjust our retail operating strategy to the changing business environment.

Last year, we announced our Capri Retail Store Optimization Program to close approximately 170 of our retail stores throughout Fiscal 2021 and Fiscal 2022, in order to improve the profitability of our retail store fleet.

Over this time period, we initially expected to incur approximately $75 million of one-time costs associated with these store closures, however, based on a reassessment, we expect these costs to be approximately $25 million.

As of December 25, 2021, we have closed a total of 140 stores and recorded net restructuring charges of $11 million relating to the program since its inception.

We have finalized the planned store closures under the Capri Retail Store Optimization Program as of the end of Fiscal 2022.

At the end of Fiscal 2022, we closed a total of 167 stores and recorded total net restructuring charges of $14 million relating to the program.

We recorded net restructuring charges of $9 million and $5 million during Fiscal 2022 and Fiscal 2021, respectively, relating to the plan.

Collectively, we continue to anticipate ongoing savings as a result of the store closures and lower depreciation associated with the impairment charges being recorded.

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Our consolidated operations are impacted by the relationships between our reporting currency, the U.S.

dollar, and those of our non-U.S.

subsidiaries whose functional/local currency is other than the U.S.

dollar, particularly the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, among others.

We continue to expect volatility in the global foreign currency exchange rates, which may have a negative impact on the reported results of certain of our non-U.S.

subsidiaries in the future, when translated to U.S.

Dollar, and those of our non-United States subsidiaries whose functional/local currency is other than the U.S.

Dollar, primarily the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, among others.

We continue to expect volatility in the global foreign currency exchange rates, which may have a negative impact on the reported results of certain of our non-United States subsidiaries in the future, when translated to the U.S.

Disruptions or delays in shipping and distribution and other supply chain constraints .

We have been experiencing global logistics challenges, including delays as a result of port congestion, vessel availability, container shortages and temporary factory closures which are expected to continue for the duration of Fiscal 2022 and into Fiscal 2023.

Our freight costs have

increased as carrier rates for ocean and air shipments have increased significantly, and the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past.

Our freight costs have increased as carrier rates for ocean and air shipments have increased significantly, and the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past.

Any future disruptions in our shipping and distribution network, including impacts on our supply chain due to temporary closures of our manufacturing partners and shipping and fulfillment constraints, could have a negative impact on our results of operations.

See Item 1A — “Risk Factors” — “We primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods and our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or shipments” of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021 for additional discussion.

Costs of manufacturing, tariffs, and import regulations.

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In addition, our costs may be impacted by sanction tariffs imposed on our products due to changes in trade terms.

For example, we have historically received benefits from duty-free imports on certain products from certain countries pursuant to the U.S.

Generalized System of Preferences (“GSP”) program.

The GSP program expired on December 31, 2020.

If the GSP program is not renewed or otherwise made retroactive, we will continue to experience significant additional duties and our gross margin will continue to be negatively impacted.

Additionally, we are subject to government import regulations, including U.S.

Customs and Border Protection (“CBP”) withhold release orders.

We are also subject to government import regulations, including United States Customs and Border Protection (“CBP”) withhold release orders.

The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order could have a material adverse effect on our business, results of operations and financial condition.

If additional tariffs or trade restrictions are implemented by the U.S.

or other countries, the cost of our products could increase which could adversely affect our business.

If additional tariffs or trade restrictions are implemented by the United States or other countries, the cost of our products could increase which could adversely affect our business.

In addition, commodity prices and tariffs may have an impact on our revenues, results of operations and cash flows.

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We operate in three reportable segments, which are as follows:

We generate revenue through the sale of Versace luxury accessories, ready-to-wear and footwear through directly operated Versace boutiques throughout North America (United States and Canada), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (including Australia), as well as through Versace outlet stores and e-commerce sites.

We generate revenue through the sale of Versace luxury accessories, ready-to-wear and footwear through directly operated Versace boutiques throughout North America (United States and Canada), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (Asia and Oceania), as well as through Versace outlet stores and e-commerce sites.

In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of products, including jeans, fragrances, watches, jewelry, eyewear and home furnishings.

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We generate revenue through the sale of Michael Kors products through four primary Michael Kors retail store formats:

“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our products, as well as licensed products bearing our name, directly to consumers throughout the Americas, certain parts of EMEA and certain parts of Asia.

Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and EMEA and Asia.

We also sell Michael Kors products directly to department stores, primarily located across the Americas and EMEA, to specialty stores and travel retail shops in the Americas, Europe and Asia, and to our geographic licensees in certain parts of

EMEA, Asia and Brazil.

“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our

products, as well as licensed products bearing our name, directly to consumers throughout the Americas, certain parts of EMEA and certain parts of Asia.

Our Michael Kors e-commerce business includes e-commerce sites in the United States, Canada and EMEA and Asia.

In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions.

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In addition to the reportable segments discussed above, we have certain corporate costs that are not directly attributable to our brands and, therefore, are not allocated to segments.

Such costs primarily include certain administrative, corporate occupancy, shared service and information systems expenses, including ERP system implementation costs.

In addition, certain other costs are not allocated to segments, including restructuring and other charges (including transaction and transition costs related to our acquisitions), impairment costs and COVID-19 related charges.

Such costs primarily include certain administrative, corporate occupancy, shared service and information systems expenses, including ERP system implementation costs and Capri transformation program costs.

In addition, certain other costs are not allocated to segments, including restructuring and other charges and COVID-19 related charges.

The segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages the business and assesses performance.

The following table presents our total revenue and income (loss) from operations by segment for the three and nine months ended December 25, 2021 and December 26, 2020 (in millions):

Three Months Ended Nine Months Ended

2021 December 26,

2020 December 25,

2021 December 26,

The following table presents our total revenue and income from operations by segment for the three months ended July 2, 2022 and June 26, 2021 (in millions):

Three Months Ended

2022 June 26,

Total revenue:

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Total revenue $ 1,360 $ 1,253

Income (loss) from operations:

Income from operations:

Versace $ 52 $ 48

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Corporate expenses

(37) (29) (123) (90)

Restructuring and other charges (3) (3)

Impairment of assets — (90) (33) (110)

COVID-19 related charges 1 3

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The following table presents our global network of retail stores and wholesale doors by brand:

2021 December 26,

2022 June 26,

Number of full price retail stores (including concessions):

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The following table presents our retail stores by geographic location:

December 25, 2021 December 26, 2020

July 2, 2022 June 26, 2021

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

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We use a number of key indicators of operating results to evaluate our performance, including the following (dollars in millions):

Three Months Ended Nine Months Ended

December 25, 2021 December 26, 2020 December 25, 2021 December 26, 2020

Three Months Ended

July 2, 2022 June 26, 2021

Total revenue $ 1,360 $ 1,253

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We evaluate our assumptions and estimates on an ongoing basis.

While our significant accounting policies are detailed in Note 2 to the accompanying consolidated financial statements, our critical accounting policies are disclosed, in full, in the MD&A section of our Annual Report on Form 10-K for the fiscal year ended March 27, 2021.

There have been no significant changes in our critical accounting policies and estimates since March 27, 2021.

There have been no significant changes in our critical accounting policies and estimates since April 2, 2022.

Results of Operations

Comparison of the three months ended December 25, 2021 with the three months ended December 26, 2020

The following table details the results of our operations for the three months ended December 25, 2021 and December 26, 2020, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Comparison of the three months ended July 2, 2022 with the three months ended June 26, 2021

The following table details the results of our operations for the three months ended July 2, 2022 and June 26, 2021, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Three Months Ended $ Change % Change % of Total Revenue for

the Three Months Ended

2021 December 26,

2020 December 25,

2021 December 26,

2022 June 26,

Statements of Operations Data:

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Depreciation and amortization 45 50 (5) (10.0) % 3.3 % 4.0 %

Impairment of assets — 90 (90) (100.0) % — % 6.9 %

Restructuring and other charges 14 1 13 NM 0.9 % 0.1 %

Restructuring and other charges 3 3 — — % 0.2 % 0.2 %

Total operating expenses 670 598 72 12.0 % 49.3 % 47.7 %

Income from operations 231 258 (27) (10.5) % 17.0 % 20.6 %

Other income, net — (3) 3 (100.0) % — % (0.2) %

Interest (income) expense, net (4) 1 (5) NM (0.3) % 0.1 %

Foreign currency gain (4) (13) 9 (69.2) % (0.2) % (1.0) %

Foreign currency loss 4 1 3 NM 0.3 % 0.1 %

Income before income taxes 231 256 (25) (9.8) % 17.0 % 20.4 %

Provision for (benefit from) income taxes 19 (5) 24 NM 1.2 % (0.4) %

Provision for income taxes 28 37 (9) (24.3) % 2.1 % 3.0 %

Net income 203 219 (16) (7.3) %

Net income (loss) attributable to noncontrolling interest 1 (1) 2 NM

Net income attributable to noncontrolling interest 2 — 2 NM

Net income attributable to Capri $ 201 $ 219 $ (18) (8.2) %

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Total Revenue

Total revenue increased $307 million, or 23.6%, to $1.609 billion for the three months ended December 25, 2021, compared to $1.302 billion for the three months ended December 26, 2020, which included net unfavorable foreign currency effects of approximately $15 million, primarily related to the weakening of the Euro and Japanese Yen against the U.S.

Dollar for the three months ended December 25, 2021.

Total revenue increased $107 million, or 8.5%, to $1.360 billion for the three months ended July 2, 2022, compared to $1.253 billion for the three months ended June 26, 2021, which included net unfavorable foreign currency effects of approximately $83 million as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the three months ended July 2, 2022.

On a constant currency basis, our total revenue increased $190 million, or 15.2%.

The increase is attributable to the continued recovery from the COVID-19 pandemic and the adverse impacts related to COVID-19 in the prior fiscal year.

Gross profit increased $200 million, or 23.6%, to $1.048 billion for the three months ended December 25, 2021, compared to $848 million for the three months ended December 26, 2020, which included net unfavorable foreign currency effects of $10 million.

Gross profit as a percentage of total revenue was 65.1% for the three months ended December 25, 2021 and December 26, 2020.

Our gross profit margin remained flat primarily due to a higher average unit price and lower promotional activity, offset by increases in supply chain costs for the three months ended December 25, 2021, as compared to the three months ended December 26, 2020.

The increase is attributable to increased retail and wholesale revenues throughout the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions, for each of our brands.

Gross profit increased $45 million, or 5.3%, to $901 million for the three months ended July 2, 2022, compared to $856 million for the three months ended June 26, 2021, which included net unfavorable foreign currency effects of $58 million.

Gross profit as a percentage of total revenue was 66.3% and 68.3% for the three months ended July 2, 2022 and June 26, 2021, respectively.

Our gross profit margin decreased primarily due to increased supply chain costs and unfavorable regional sales mix for the three months ended July 2, 2022, as compared to the three months ended June 26, 2021.

Total Operating Expenses

Total operating expenses increased $36 million, or 5.3%, to $717 million for the three months ended December 25, 2021, compared to $681 million for the three months ended December 26, 2020.

Total operating expenses increased $72 million, or 12.0%, to $670 million for the three months ended July 2, 2022, compared to $598 million for the three months ended June 26, 2021.

Our operating expenses included a net favorable foreign currency impact of approximately $46 million.

Total operating expenses decreased to 44.6% as a percentage of total revenue for the three months ended December 25, 2021, compared to 52.3% for the three months ended December 26, 2020.

Total operating expenses increased to 49.3% as a percentage of total revenue for the three months ended July 2, 2022, compared to 47.7% for the three months ended June 26, 2021.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $118 million, or 21.9%, to $656 million for the three months ended December 25, 2021, compared to $538 million for the three months ended December 26, 2020, primarily due to increased retail store, e-commerce and corporate costs for the three months ended December 25, 2021.

Selling, general, and administrative expenses as a percentage of total revenue decreased to 40.8% for the three months ended December 25, 2021, compared to 41.3% for the three months ended December 26, 2020, primarily due to leveraging of operating expenses as a result of higher revenue, partially offset by an increase in marketing expenses as a percentage of revenue for the three months ended December 25, 2021, as compared to the three months ended December 26, 2020.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $8 million, or 27.6%, to $37 million for the three months ended December 25, 2021 as compared to $29 million for the three months ended December 26, 2020, primarily due to an increase in compensation expense and ERP system implementation expenses.

Selling, general and administrative expenses increased $77 million, or 14.1%, to $622 million for the three months ended July 2, 2022, compared to $545 million for the three months ended June 26, 2021, primarily due to increased retail store and e-commerce expenses from higher revenue and higher corporate costs for the three months ended July 2, 2022.

Selling, general, and administrative expenses as a percentage of total revenue increased to 45.7% for the three months ended July 2, 2022, compared to 43.5% for the three months ended June 26, 2021, primarily due to increased retail store, e-commerce and marketing costs as a percentage of revenue for the three months ended July 2, 2022, as compared to the three months ended June 26, 2021.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $19 million, or 46.3%, to $60 million for the three months ended July 2, 2022 as compared to $41 million for the three months ended June 26, 2021, primarily due to an increase in professional fees related to the ongoing ERP system implementation and Capri transformation projects.

Depreciation and Amortization

Depreciation and amortization decreased $5 million, or 9.6%, to $47 million for the three months ended December 25, 2021, compared to $52 million for the three months ended December 26, 2020.

Depreciation and amortization decreased $5 million, or 10.0%, to $45 million for the three months ended July 2, 2022, compared to $50 million for the three months ended June 26, 2021.

As a percentage of total revenue, depreciation and amortization decreased to 3.3% for the three months ended July 2, 2022, compared to 4.0% for the three months ended June 26, 2021.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to lower capital expenditures in Fiscal 2022 and Fiscal 2021.

Depreciation and amortization decreased to 2.9% as a percentage of total revenue for the three months ended December 25, 2021, compared to 4.0% for the three months ended December 26, 2020 primarily due to lower revenues during the prior year due to COVID-19.

Impairment of Assets

For the three months ended December 25, 2021, we did not recognize any asset impairment charges except for the amount recorded within restructuring and other charges (see Note 8 to the accompanying consolidated financial statements for additional information).

For the three months ended December 26, 2020, we recognized asset impairment charges of approximately $90 million, primarily related to operating lease right-of-use assets across our brands.

See Note 11 to the accompanying consolidated financial statements for additional information.

Restructuring and Other Charges

For the three months ended December 25, 2021, we recognized restructuring and other charges of $14 million, which included $10 million related to our Capri Retail Store Optimization Program and other costs of $4 million primarily related to equity awards associated with the acquisition of Versace.

For the three months ended July 2, 2022, we recognized restructuring and other charges of $3 million, which primarily related to equity awards associated with the acquisition of Versace.

See Note 8 to the accompanying consolidated financial statements for additional information.

For the three months ended December 26, 2020, we recognized restructuring and other charges of $1 million, which included other costs of $5 million primarily related to equity awards associated with the acquisition of Versace and closures of certain corporate locations, partially offset by $4 million of gains related to our Capri Retail Store Optimization Program.

For the three months ended June 26, 2021, we recognized restructuring and other charges of $3 million, which included other costs of $6 million primarily related to equity awards associated with the acquisition of Versace, partially offset by $3 million of gains related to our Capri Retail Store Optimization Program.

Restructuring and other charges are not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).

Income from Operations

As a result of the foregoing, income from operations increased $164 million, to $331 million for three months ended December 25, 2021, compared to $167 million for the three months ended December 26, 2020.

Income from operations as a percentage of total revenue increased to 20.6% for the three months ended December 25, 2021, compared to 12.8% for the three months ended December 26, 2020.

See Segment Information above for a reconciliation of our segment operating income (loss) to total operating income.

As a result of the foregoing, income from operations decreased $27 million, to $231 million for three months ended July 2, 2022, compared to $258 million for the three months ended June 26, 2021.

Income from operations as a percentage of total revenue decreased to 17.0% for the three months ended July 2, 2022, compared to 20.6% for the three months ended June 26, 2021.

See Segment Information above for a reconciliation of our segment operating income to total operating income.

Interest (Income) Expense, net

For the three months ended December 25, 2021, we recognized $7 million of interest income compared to $10 million of interest expense for the three months ended December 26, 2020.

The $17 million improvement in interest (income) expense, net, is primarily due to an increase of interest income from higher average notional amounts outstanding and more favorable interest rates on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Gain

For the three months ended December 25, 2021 and December 26, 2020, we recognized a net foreign currency gain of $4 million and $13 million, respectively, primarily attributable to the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for (Benefit from) Income Taxes

The provision for income taxes was $19 million for the three months ended December 25, 2021, compared to a benefit of $5 million for the three months ended December 26, 2020.

Our effective tax rate was 5.6% and (2.9)% for the three months ended December 25, 2021 and December 26, 2020, respectively.

The change in our effective tax rate was primarily related to increases in uncertain tax positions and release of certain valuation allowances in the prior year which were not recurring, partially offset by the favorable effect of a net operating loss carryback claim made in the United States as a result of COVID-19 related losses.

For the three months ended July 2, 2022, we recognized $4 million of interest income compared to $1 million of interest expense for the three months ended June 26, 2021.

The $5 million improvement in interest (income) expense, net, is primarily due to more favorable interest rates on our net investment hedges in the current year and an increase of interest income from higher average notional amounts outstanding, partially offset by an increase in interest expense attributable to higher average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss

For the three months ended July 2, 2022 and June 26, 2021, we recognized a net foreign currency loss of $4 million and $1 million, respectively, primarily attributable to intercompany transactions among our subsidiaries.

Provision for Income Taxes

The provision for income taxes was $28 million for the three months ended July 2, 2022, compared to $37 million for the three months ended June 26, 2021.

Our effective tax rates were 12.1% and 14.5% for the three months ended July 2, 2022 and June 26, 2021, respectively.

The decrease in our effective tax rate was primarily related to the revaluation of net deferred tax liabilities as a result of the tax rate change in the United Kingdom during the prior year, partially offset by a higher tax rate due to the unfavorable geographic mix of earnings.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the current fiscal year quarter.

Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S.

state and local taxes and tax rates in foreign jurisdictions.

Our effective tax rate may fluctuate from time to time due to the effects of changes in United States state and local taxes and tax rates in foreign jurisdictions.

In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.

Net Income (Loss) Attributable to Noncontrolling Interest

For the three months ended December 25, 2021, we recorded net income of $1 million and for the three months ended December 26, 2020, we recorded a net loss of $1 million, attributable to the noncontrolling interest in our joint ventures.

These amounts represent the share of income (loss) that is not attributable to the Company.

Net Income Attributable to Noncontrolling Interest

For the three months ended July 2, 2022, we recorded net income of $2 million and for the three months ended June 26, 2021, we recorded an immaterial net income, attributable to the noncontrolling interest in our joint ventures.

These amounts represent the share of income that is not attributable to the Company.

Net Income Attributable to Capri

As a result of the foregoing, our net income increased $143 million to $322 million for the three months ended December 25, 2021, compared to a net income of $179 million for the three months ended December 26, 2020.

As a result of the foregoing, our net income decreased $18 million to $201 million for the three months ended July 2, 2022, compared to a net income of $219 million for the three months ended June 26, 2021.

Segment Information

Three Months Ended % Change

(dollars in millions) December 25,

2021 December 26,

(dollars in millions) July 2,

2022 June 26,

2021 $ Change As

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Revenues $ 275 $ 240 $ 35 14.6 % 29.6 %

Income from operations 32 13 19 NM

Operating margin 12.7 % 6.7 %

NM Not meaningful

Versace revenues increased $56 million, or 28.7%, to $251 million for the three months ended December 25, 2021, compared to $195 million for the three months ended December 26, 2020, which included unfavorable foreign currency effects of $10 million.

On a constant currency basis, revenue increased $66 million, or 33.8%, primarily attributable to the continued recovery from the COVID-19 pandemic and the adverse impacts related to COVID-19 in the prior fiscal year.

Income from operations 52 48 4 8.3 %

For the three months ended December 25, 2021, Versace recorded income from operations of $32 million, compared to $13 million for the three months ended December 26, 2020.

Operating margin increased from 6.7% for the three months ended December 26, 2020, to 12.7% for the three months ended December 25, 2021, primarily due to higher average unit price and leveraging of operating expenses due to higher revenue.

Three Months Ended % Change

(dollars in millions) December 25,

2021 December 26,

2020 $ Change As

Reported Constant

Revenues $ 178 $ 121 $ 57 47.1 % 43.0 %

Income (loss) from operations 16 (8) 24 NM

Operating margin 18.9 % 20.0 %

NM Not meaningful

Jimmy Choo revenues increased $57 million, or 47.1%, to $178 million for the three months ended December 25, 2021, compared to $121 million for the three months ended December 26, 2020, which included favorable foreign currency effects of $5 million.

On a constant currency basis, revenue increased $52 million, or 43.0%, primarily attributable to the continued recovery from the COVID-19 pandemic and the adverse impacts related to COVID-19 in the prior fiscal year.

Income (Loss) from Operations

For the three months ended December 25, 2021, Jimmy Choo recorded income from operations of $16 million, compared to a loss from operations of $8 million for the three months ended December 26, 2020.

Operating margin improved from (6.6)% for the three months ended December 26, 2020 to 9.0% for the three months ended December 25, 2021, primarily due to lower promotional activity and leveraging of operating expenses due to higher revenue.

Versace revenues increased $35 million, or 14.6%, to $275 million for the three months ended July 2, 2022, compared to $240 million for the three months ended June 26, 2021, which included unfavorable foreign currency effects of $36 million.

On a constant currency basis, revenue increased $71 million, or 29.6%, primarily attributable to increased retail revenue and higher wholesale shipments in the Americas and EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended July 2, 2022, Versace recorded income from operations of $52 million, compared to $48 million for the three months ended June 26, 2021.

Operating margin decreased from 20.0% for the three months ended June 26, 2021, to 18.9% for the three months ended July 2, 2022, primarily due to unfavorable regional sales mix and investments in marketing and advertising.

Three Months Ended % Change

(dollars in millions) December 25,

2021 December 26,

(dollars in millions) July 2,

2022 June 26,

2021 $ Change As

3 unchanged sentences

Operating margin 11.0 % 7.7 %

Michael Kors revenues increased $194 million, or 19.7%, to $1.180 billion for the three months ended December 25, 2021, compared to $986 million for the three months ended December 26, 2020, which included unfavorable foreign currency effects of $10 million.

On a constant currency basis, revenue increased $204 million, or 20.7%, primarily attributable to the continued recovery from the COVID-19 pandemic and the adverse impacts related to COVID-19 in the prior fiscal year.

Income from Operations

For the three months ended December 25, 2021, Michael Kors recorded income from operations of $335 million, compared to $281 million for the three months ended December 26, 2020.

Operating margin decreased slightly from 28.5% for the three months ended December 26, 2020, to 28.4% for the three months ended December 25, 2021, primarily due to increases in supply chain costs, mostly offset by higher average unit price and leveraging of expenses due to higher revenue.

Results of Operations

Comparison of the nine months ended December 25, 2021 with the nine months ended December 26, 2020

The following table details the results of our operations for the nine months ended December 25, 2021 and December 26, 2020, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Nine Months Ended $ Change % Change % of Total Revenue for the Nine Months Ended

2021 December 26,

2020 December 25, 2021 December 26, 2020

Statements of Operations Data:

Total revenue $ 4,162 $ 2,863 $ 1,299 45.4 %

Cost of goods sold 1,374 1,003 371 37.0 % 33.0 % 35.0 %

Gross profit 2,788 1,860 928 49.9 % 67.0 % 65.0 %

Selling, general and administrative expenses 1,800 1,414 386 27.3 % 43.2 % 49.4 %

Depreciation and amortization 146 160 (14) (8.8) % 3.5 % 5.6 %

Impairment of assets 33 110 (77) (70.0) % 0.8 % 3.8 %

Restructuring and other charges 25 18 7 38.9 % 0.6 % 0.6 %

Total operating expenses 2,004 1,702 302 17.7 % 48.1 % 59.4 %

Income from operations 784 158 626 NM 18.8 % 5.5 %

Other income, net (2) (4) 2 (50.0) % — % (0.1) %

Interest (income) expense, net (11) 39 (50) NM (0.3) % 1.4 %

Foreign currency loss (gain) 1 (16) 17 NM — % (0.6) %

Income before income taxes 796 139 657 NM 19.1 % 4.9 %

Provision for income taxes

54 20 34 NM 1.3 % 0.7 %

Net income 742 119 623 NM

Net income (loss) attributable to noncontrolling interest 1 (2) 3 NM

Net income attributable to Capri $ 741 $ 121 $ 620 NM

NM Not meaningful

Total Revenue

Total revenue increased $1.299 billion, or 45.4%, to $4.162 billion for the nine months ended December 25, 2021, compared to $2.863 billion for the nine months ended December 26, 2020, which included net favorable foreign currency effects of approximately $71 million, primarily related to the strengthening of the British Pound, Euro, Chinese Renminbi and Canadian Dollar against the U.S.

Dollar for the nine months ended December 25, 2021.

On a constant currency basis, our total revenue increased $1.228 billion, or 42.9%.

The increase is attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Gross profit increased $928 million, or 49.9%, to $2.788 billion for the nine months ended December 25, 2021, compared to $1.860 billion for the nine months ended December 26, 2020, which included net favorable foreign currency effects of $48 million.

Gross profit as a percentage of total revenue increased 200 basis points to 67.0% for the nine months ended December 25, 2021, compared to 65.0% for the nine months ended December 26, 2020.

The increase in gross profit margin was primarily attributable to a higher average unit price and lower promotional activity, partially offset by increases in supply chain costs and unfavorable channel mix.

Total Operating Expenses

Total operating expenses increased $302 million, or 17.7%, to $2.004 billion for the nine months ended December 25, 2021, compared to $1.702 billion for the nine months ended December 26, 2020.

Our operating expenses included a net unfavorable foreign currency impact of approximately $49 million.

Total operating expenses decreased to 48.1% as a percentage of total revenue for the nine months ended December 25, 2021, compared to 59.4% for the nine months ended December 26, 2020.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $386 million, or 27.3%, to $1.800 billion for the nine months ended December 25, 2021, compared to $1.414 billion for the nine months ended December 26, 2020, primarily due to increased retail store, e-commerce, corporate costs and marketing expenses for the nine months ended December 25, 2021.

Selling, general and administrative expenses as a percentage of total revenue decreased to 43.2% for the nine months ended December 25, 2021, compared to 49.4% for the nine months ended December 26, 2020, primarily due to leveraging of operating expenses as a result of higher revenue.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $33 million, or 36.7%, to $123 million for the nine months ended December 25, 2021 as compared to $90 million for the nine months ended December 26, 2020, primarily due to an increase in compensation expense and professional fees.

Depreciation and Amortization

Depreciation and amortization decreased $14 million, or 8.8%, to $146 million for the nine months ended December 25, 2021, compared to $160 million for the nine months ended December 26, 2020.

The decrease in depreciation and amortization expense was primarily attributable to lower depreciation due to lower capital expenditures in Fiscal 2022 and Fiscal 2021.

Depreciation and amortization decreased to 3.5% as a percentage of total revenue for the nine months ended December 25, 2021, compared to 5.6% for the nine months ended December 26, 2020 primarily due to higher revenues for the nine months ended December 25, 2021.

Impairment of Assets

For the nine months ended December 25, 2021 and December 26, 2020, we recognized asset impairment charges of $33 million and $110 million, respectively, which primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

See Note 11 to the accompanying consolidated financial statements for additional information.

Restructuring and Other Charges

For the nine months ended December 25, 2021, we recognized restructuring and other charges of $25 million, which included other costs of $19 million primarily related to equity awards associated with the acquisition of Versace and $6 million related to our Capri Retail Store Optimization Program (see Note 8 to the accompanying consolidated financial statements for additional information).

For the nine months ended December 26, 2020, we recognized restructuring and other charges of $18 million, which included other costs of $17 million primarily related to equity awards associated with the acquisition of Versace and $1 million related to our Capri Retail Store Optimization Program.

Restructuring and other charges are not evaluated as part of our reportable segments’ results (see Segment Information above for additional information).

Jimmy Choo revenues increased $30 million, or 21.1%, to $172 million for the three months ended July 2, 2022, compared to $142 million for the three months ended June 26, 2021, which included unfavorable foreign currency effects of $13 million.

On a constant currency basis, revenue increased $43 million, or 30.3%, primarily attributable to increased retail revenue in the Americas and EMEA.

Income from Operations

As a result of the foregoing, income from operations increased $626 million, to $784 million for the nine months ended December 25, 2021, compared to $158 million for the nine months ended December 26, 2020.

Income from operations as a percentage of total revenue increased to 18.8% for the nine months ended December 25, 2021, compared to 5.5% for the nine months ended December 26, 2020.

See Segment Information above for a reconciliation of our segment operating income to total operating income.

Interest (Income) Expense, net

For the nine months ended December 25, 2021, we recognized $11 million of interest income compared to $39 million of interest expense for the nine months ended December 26, 2020.

The $50 million improvement in interest (income) expense, net, is primarily due to an increase of interest income from higher average notional amounts outstanding and more favorable interest rates on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss (Gain)

For the nine months ended December 25, 2021 and December 26, 2020, we recognized a net foreign currency loss of $1 million and a net foreign currency gain of $16 million, respectively, primarily attributable to the remeasurement of dollar-denominated intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

For the nine months ended December 25, 2021, we recognized $54 million of income tax expense compared to $20 million for the nine months ended December 26, 2020.

Our effective tax rate was 6.8% and 14.4% for the nine months ended December 25, 2021 and December 26, 2020, respectively.

The decrease in our effective rate was primarily due to the favorable effect of a net operating loss carryback claim made in the United States as a result of COVID-19 related losses and a benefit recognized as a result of recently enacted tax legislation in Italy which allowed the Company to reduce its deferred tax liabilities.

Specifically, this change allowed the Company to step up certain intangible assets which will result in lower future cash taxes.

Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S.

state and local taxes and tax rates in foreign jurisdictions.

In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results of various global tax strategies, may also impact our effective tax rate in future periods.

Net Income (Loss) Attributable to Noncontrolling Interest

For the nine months ended December 25, 2021, we recorded net income of $1 million and for the nine months ended December 26, 2020, we recorded a net loss of $2 million, attributable to the noncontrolling interest in our joint ventures.

These amounts represent the share of income (loss) that is not attributable to the Company.

Net Income Attributable to Capri

As a result of the foregoing, our net income increased $620 million to a net income of $741 million for the nine months ended December 25, 2021, compared to a net income of $121 million for the nine months ended December 26, 2020.

Segment Information

Nine Months Ended % Change

(dollars in millions) December 25,

2021 December 26,

2020 $ Change As

Reported Constant

Revenues $ 773 $ 483 $ 290 60.0 % 56.9 %

Income (loss) from operations 135 (8) 143 NM

Operating margin 17.5 % (1.7) %

NM Not meaningful

Versace revenues increased $290 million, or 60.0%, to $773 million for the nine months ended December 25, 2021, compared to $483 million for the nine months ended December 26, 2020, which included favorable foreign currency effects of $15 million.

On a constant currency basis, revenue increased $275 million, or 56.9%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income (Loss) from Operations

For the nine months ended December 25, 2021, Versace recorded income from operations of $135 million, compared to a loss from operations of $8 million for the nine months ended December 26, 2020.

Operating margin improved from (1.7)% for the nine months ended December 26, 2020, to 17.5% for the nine months ended December 25, 2021, primarily due to a higher average unit price and lower promotional activity, as well as leveraging of operating expenses due to higher revenue.

Nine Months Ended % Change

(dollars in millions) December 25,

2021 December 26,

2020 $ Change As

Reported Constant

Revenues $ 457 $ 294 $ 163 55.4 % 45.2 %

Income (loss) from operations 28 (37) 65 NM

Operating margin 6.1 % (12.6) %

NM Not meaningful

Jimmy Choo revenues increased $163 million, or 55.4%, to $457 million for the nine months ended December 25, 2021, compared to $294 million for the nine months ended December 26, 2020, which included favorable foreign currency effects of $30 million.

On a constant currency basis, revenue increased $133 million, or 45.2%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Income (Loss) from Operations

For the nine months ended December 25, 2021, Jimmy Choo recorded income from operations of $28 million, compared to a loss from operations of $37 million for the nine months ended December 26, 2020.

Operating margin improved from (12.6)% for the nine months ended December 26, 2020, to 6.1% for the nine months ended December 25, 2021, primarily due to lower promotional activity and leveraging of operating expenses due to higher revenue.

Nine Months Ended % Change

(dollars in millions)

2021 December 26,

For the three months ended July 2, 2022, Jimmy Choo recorded income from operations of $19 million, compared to $11 million for the three months ended June 26, 2021.

Operating margin increased from 7.7% for the three months ended June 26, 2021 to 11.0% for the three months ended July 2, 2022, primarily due to leveraging of operating expenses on higher revenue.

Three Months Ended % Change

(dollars in millions) July 2,

2022 June 26,

2021 $ Change As

3 unchanged sentences

Operating margin 24.3 % 27.6 %

Michael Kors revenues increased $846 million, or 40.6%, to $2.932 billion for the nine months ended December 25, 2021, compared to $2.086 billion for the nine months ended December 26, 2020, which included favorable foreign currency effects of $26 million.

On a constant currency basis, revenue increased $820 million, or 39.3%, primarily attributable to the continued recovery from the COVID-19 pandemic.

In the prior fiscal year, the Company experienced widespread, temporary store closures and a significant decline in store traffic.

Michael Kors revenues increased $42 million, or 4.8%, to $913 million for the three months ended July 2, 2022, compared to $871 million for the three months ended June 26, 2021, which included unfavorable foreign currency effects of $34 million.

On a constant currency basis, revenue increased $76 million, or 8.7%, primarily due to higher wholesale shipments and increased retail revenue in the Americas and EMEA, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Income from Operations

For the nine months ended December 25, 2021, Michael Kors recorded income from operations of $795 million, compared to $423 million for the nine months ended December 26, 2020.

Operating margin improved from 20.3% for the nine months ended December 26, 2020, to 27.1% for the nine months ended December 25, 2021, primarily due to a higher average unit price and leveraging of operating expenses due to higher revenue, partially offset by increases in supply chain costs.

For the three months ended July 2, 2022, Michael Kors recorded income from operations of $222 million, compared to $240 million for the three months ended June 26, 2021.

Operating margin decreased from 27.6% for the three months ended June 26, 2021, to 24.3% for the three months ended July 2, 2022, primarily due to increased supply chain costs.

Liquidity and Capital Resources

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We believe that the cash generated from operations, together with borrowings available under our revolving credit facilities and available cash and cash equivalents, will be sufficient to meet our working capital needs for the next 12 months and beyond, including investments made and expenses incurred in connection with our store growth plans, investments in corporate and distribution facilities, continued systems development, e-commerce and marketing initiatives.

We spent $85 million on capital expenditures during the nine months ended December 25, 2021.

We spent $36 million on capital expenditures during the three months ended July 2, 2022.

The following table sets forth key indicators of our liquidity and capital resources (in millions):

2021 March 27,

2022 April 2,

Balance Sheet Data:

4 unchanged sentences

Long-term debt $ 1,382 $ 1,131

Nine Months Ended

2021 December 26,

Three Months Ended

2022 June 26,

Cash Flows Provided By (Used In):

3 unchanged sentences

Effect of exchange rate changes $ (65) $ (2)

Net increase (decrease) in cash and cash equivalents $ 30 $ (363)

Net increase in cash and cash equivalents $ 52 $ 124

Cash Provided by Operating Activities

Net cash provided by operating activities increased $168 million to $713 million during the nine months ended December 25, 2021, as compared to $545 million for the nine months ended December 26, 2020, as a result of an increase in our net income after non-cash adjustments, partially offset by decreases related to changes in our working capital.

The decreases related to the changes in our working capital are primarily attributable to an increase in our inventory levels, an increase in income tax receivables and fluctuations in the timing of payments and receipts when compared to the prior year.

Cash Used in Investing Activities

Net cash used in investing activities was $26 million during the nine months ended December 25, 2021, as compared to $97 million during the nine months ended December 26, 2020, which was primarily attributable to the settlement of certain net investment hedges of $59 million during the nine months ended December 25, 2021.

Net cash provided by operating activities decreased $67 million to $137 million during the three months ended July 2, 2022, as compared to $204 million for the three months ended June 26, 2021, as a result of a decrease in our net income after non-cash adjustments and decreases related to changes in our working capital.

The decreases related to the changes in our working capital are primarily attributable to an increase in our inventory levels partially offset by fluctuations in the timing of payments and receipts when compared to the prior year.

Cash Provided by Investing Activities

Net cash provided by investing activities was $30 million during the three months ended July 2, 2022, as compared to net cash used in investing activities of $23 million during the three months ended June 26, 2021.

The increase in net cash provided by investing activities were primarily attributable to the settlement of certain net investment hedges of $66 million during the three months ended July 2, 2022 partially offset by higher capital expenditures of $13 million compared to prior year.

Cash Used in Financing Activities

Net cash used in financing activities was $663 million during the nine months ended December 25, 2021, as compared to $803 million during the nine months ended December 26, 2020.

Net cash used in financing activities was $50 million during the three months ended July 2, 2022, as compared to $55 million during the three months ended June 26, 2021.

The decrease of cash used in financing activities of $5 million was primarily attributable to a decrease in net debt repayments of $271 million, partially offset by a $253 million increase in cash payments to repurchase our ordinary shares compared to prior year.

Debt Facilities

The following table presents a summary of our borrowing capacity and amounts outstanding as of December 25, 2021 and March 27, 2021 (in millions):

2021 March 27,

Senior Secured Revolving Credit Facility:

The following table presents a summary of our borrowing capacity and amounts outstanding as of July 2, 2022 and April 2, 2022 (in millions):

2022 April 2,

Senior Unsecured Revolving Credit Facility:

Revolving Credit Facility (excluding up to a $500 million accordion feature) (1)

5 unchanged sentences

Borrowings outstanding, net of debt issuance costs (2)

Remaining availability $ — $ —

364 Credit Facility ($230 million)

Total availability $ — $ 230

Remaining availability $ — $ 230

Senior Notes due 2024

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Total availability (1.0 billion Japanese Yen) $ 7 $ 8

Borrowings outstanding (0.0 billion and 1.0 billion Japanese Yen) (4)

Remaining availability (1.0 billion and 0.0 billion Japanese Yen) $ 9 $ —

Borrowings outstanding — —

Remaining availability (1.0 billion Japanese Yen) $ 7 $ 8

Versace Uncommitted Credit Facilities:

Total availability (48 million and 57 million Euro) $ 54 $ 67

Borrowings outstanding (0 million Euro) — —

Remaining availability (48 million and 57 million Euro) $ 54 $ 67

Total availability (48 million Euro) (5)

Borrowings outstanding — —

Remaining availability (48 million Euro) $ 50 $ 52

Total borrowings outstanding (1)

1 unchanged sentence

Total remaining availability $ 638 $ 881

(1) The financial covenant in our 2018 Credit Facility requiring us to maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.00 had been waived through the fiscal quarter ending June 26, 2021.

On May 26, 2021 (the “Election Date”), the company delivered to the administrative agent the certificate required to terminate the Applicable Period.

Effective as of the Election Date, the Company is required to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.00.

As of December 25, 2021 and March 27, 2021, we were in compliance with all covenants related to our agreements then in effect governing our debt.

(1) The financial covenant in our 2022 Credit Facility requires us to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.0.

As of July 2, 2022 and April 2, 2022, we were in compliance with all covenants related to our agreements then in effect governing our debt.

See Note 9 to the accompanying consolidated financial statements for additional information.

(2) As of December 25, 2021, all amounts are recorded as long-term debt in our consolidated balance sheets.

As of March 27, 2021, all amounts are recorded as long-term debt, except for the current portion of $97 million outstanding under the 2018 Term Loan Facility, which was recorded within short-term debt in our consolidated balance sheets.

(3) The balance as of December 25, 2021 consists of $18 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $18 million related to the sale of certain Versace tax receivables, with $8 million and $10 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of March 27, 2021 consists of $17 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets and $4 million of other loans recorded as long-term debt in our consolidated balance sheets.

(4) Recorded as short-term debt in our consolidated balance sheets as of March 27, 2021.

(2) As of July 2, 2022, we no longer had a Term Loan Facility under our 2022 Credit Facility as it was fully repaid.

As of April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(3) As of July 2, 2022 and April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(4) The balance as of July 2, 2022 consists of $36 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $10 million related to the sale of certain Versace tax receivables, with $1 million and $9 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of April 2, 2022 consists of $21 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets, $18 million related to the sale of certain Versace tax receivables, with $8 million and $10 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

(5) The balance as of July 2, 2022 and April 2, 2022 represents the total availability of the credit facility, which excludes bank guarantees.

We believe that our 2022 Credit Facility is adequately diversified with no undue concentration in any one financial institution.

As of December 25, 2021, there were 25 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of July 2, 2022, there were 17 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the 2022 Credit Facility.

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Share Repurchase Program

The following table presents our ordinary share repurchases during the nine months ended December 25, 2021 and December 26, 2020 (dollars in millions):

Nine Months Ended

2021 December 26,

The following table presents our ordinary share repurchases during the three months ended July 2, 2022 and June 26, 2021 (dollars in millions):

Three Months Ended

2022 June 26,

Cost of shares repurchased under share repurchase program $ 300 $ 50

4 unchanged sentences

6,385,485 1,088,150

During the first quarter of Fiscal 2022, we reinstated our $500 million share repurchase program, which was previously suspended during the first quarter of Fiscal 2021 in response to the impact of the COVID-19 pandemic and the provisions of the Second Amendment of the 2018 Credit Facility.

See Note 9 in the accompanying financial statements for additional information.

On November 3, 2021, we announced that our Board of Directors had terminated our existing $500 million share repurchase program (the “Prior Plan”), with $250 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2022 Plan”) pursuant to which we may, from time to time, repurchase up to $1.0 billion of our outstanding ordinary shares within a period of two years from the effective date of the program.

Subsequently, on November 3, 2021, we announced that our Board of Directors had terminated our existing $500 million share repurchase program (the “Prior Plan”), with $250 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2022 Plan”) pursuant to which we may, from time to time, repurchase up to $1.0 billion of our outstanding ordinary shares within a period of two years from the effective date of the program.

On June 1, 2022, we announced that our Board of Directors has terminated our Fiscal 2022 Plan, with $500 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2023 Plan”) pursuant to which we may, from time to time, repurchase up to $1.0 billion of our outstanding ordinary shares within period of two years from the effective date of the program.

Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under our insider trading policy and other relevant factors.

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Contractual Obligations and Commercial Commitments

Please refer to the “Contractual Obligations and Commercial Commitments” disclosure within the “Liquidity and Capital Resources” section of our Fiscal 2021 Form 10-K for a detailed disclosure of our other contractual obligations and commitments as of March 27, 2021.

Please refer to the “Contractual Obligations and Commercial Commitments” disclosure within the “Liquidity and Capital Resources” section of our Fiscal 2022 Form 10-K for a detailed disclosure of our other contractual obligations and commitments as of April 2, 2022.

Off-Balance Sheet Arrangements

We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business.

Our off-balance sheet commitments relating to our outstanding letters of credit were $35 million at December 25, 2021, including $6 million in letters of credit issued outside of the 2018 Credit Facility.

In addition, as of December 25, 2021, bank guarantees of approximately $34 million were supported by our various credit facilities.

Our off-balance sheet commitments relating to our outstanding letters of credit were $35 million at July 2, 2022, including $14 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of July 2, 2022, bank guarantees of approximately $34 million were supported by our various credit facilities.

We do not have any other off-balance sheet arrangements or relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis