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Item 7. Management’s Discussion and Analysis

2023-05-31 compared with 2022-06-01 · 187 added, 217 removed, 369 unchanged (52% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis (“MD&A”) of our Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual Report on Form 10-K.

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 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.

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.

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, or if there are further supply chain disruptions, including additional production delays and increased costs, 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 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;

the risk of cybersecurity threats and privacy or 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 such 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;

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

fluctuations in the capital markets;

fluctuations in interest and exchange rates;

the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes;

extreme weather conditions and natural disasters;

political or economic instability in principal markets;

adverse outcomes in litigation;

and general, local and global economic, political, business and market conditions including acts of war and other geopolitical conflicts, as well as those risks set forth in the Company’s filings with the U.S.

Securities and Exchange Commission, including in this Annual Report on Form 10-K, particularly under “Item 1A.

Risk Factors”.

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.

Our 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.

Our goal is to continue to extend the global reach of our brands while ensuring that they maintain their independence and exclusive DNA.

Capri Holdings Limited 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.

Our Versace brand has long been recognized as one of the world’s leading international fashion design houses and is synonymous with Italian glamour and style.

Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship.

Over the past several decades, the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of accessories, ready-to-wear, footwear, eyewear, watches, jewelry, fragrance and home furnishings businesses.

Versace’s design team is led by Donatella Versace, who has been the brand’s Artistic Director for over 20 years.

Versace distributes its products through a worldwide distribution network, which includes boutiques in some of the world’s most glamorous cities, its e-commerce sites, as well as through the most prestigious department and specialty stores worldwide.

Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessories brand, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, jewelry, scarves and belts, as well as a growing men’s luxury shoe and accessory business.

Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessory brand, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, jewelry, scarves and belts, as well as a growing men’s luxury shoe and accessory business.

In addition, certain categories, such as fragrances and eyewear are produced under licensing agreements.

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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, a world-renowned designer, 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, a world-renowned designer, 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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Certain Factors Affecting Financial Condition and Results of Operations

Macroeconomic conditions and inflationary pressures.

Global economic conditions and the related impact on levels of consumer spending worldwide impacted our business in Fiscal 2023, and are likely to continue to impact our business and the accessories, footwear and apparel industry overall for the foreseeable future.

Inflation, rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on market declines and uncertainty, home prices, credit availability and consumer debt levels, concerns of a global banking crisis, political instability due to war or other geopolitical factors and other macroeconomic pressures and general uncertainty regarding the overall future economic environment have led to recession fears and created a challenging retail environment, particularly in the second half of Fiscal 2023, which is expected to continue in the near term.

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 which could negatively affect our financial condition and results of operations.

COVID-19 pandemic.

The ongoing COVID-19 pandemic has caused significant disruption to the global economy, consumer spending and behavior, tourism and to financial markets.

While the overall COVID-19 situation appears to be improving, our business and operating results may be negatively impacted if the virus worsens or mutates, if vaccination efforts are unsuccessful and/or if regions or countries take further actions to contain the virus (including additional extended lock-downs and travel restrictions), among others.

We continue to monitor the latest developments regarding the pandemic and have made certain assumptions about the pandemic for purposes of our business and operating results, including assumptions regarding the duration, severity and global macroeconomic impacts of the pandemic;

however, the full extent of the impact of COVID-19 on our business and operating results will depend largely on future events outside of our control, including the duration and severity of the pandemic and the success of vaccination efforts, new information concerning the virus or variants of the virus, actions different states, regions or countries may take to contain the virus (including extended lock-downs and travel restrictions) and the economic impacts of the pandemic, including recent inflationary pressures, among others.

“Risk Factors” — “The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations.” 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 .

The Company's performance during Fiscal 2023 was adversely impacted due to lockdowns in certain regions, most notably in Greater China, as a result of an increase in infections due to variants of COVID-19.

These lockdowns resulted in store closures and an overall decline in demand in the region.

While the situation seems to be improving, infection rates and government restrictions may continue to persist in Greater China or elsewhere .

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.

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

As the personal luxury goods market continues to evolve, Capri is committed to creating engaging luxury experiences globally.

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

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

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

As of April 2, 2022, we closed a total of 167 stores and recorded total net restructuring charges of $14 million relating to the plan.

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

See Item 9B - Other Information for additional information.

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

however, growth may be limited by concerns over inflation, the possibility of a global recession, foreign currency volatility or worsening economic conditions.

Foreign currency fluctuation.

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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 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.

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.

Any disruptions in our shipping and distribution network, including port congestion, vessel availability, container shortages and temporary factory closures, could have a negative impact on our results of operations.

“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” for additional discussion.

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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 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 CBP withhold release orders.

We rely on free trade agreements and other supply chain initiatives in order to maximize efficiencies relating to product importation.

We are also subject to government import regulations, including 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.

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In addition, manufacturing labor costs are also subject to degrees of volatility based on local and global economic conditions.

We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs to our product.

We use commercially reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs of our product.

Segment Information

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“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.

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

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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 and Capri transformation program costs.

In addition, certain other costs are not allocated to segments, including restructuring and other charges, impairment costs, COVID-19 related charges, charitable donations and the war in Ukraine.

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

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

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

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Fiscal Years Ended

2022 March 27,

2023 April 2,

2022 March 27,

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COVID-19 related charges (2)

14 (42) (119)

Impact of war in Ukraine (3)

Restructuring and other charges (16) (42) (32)

Total income (loss) from operations $ 903 $ 19 $ (192)

(1) Impairment of assets during Fiscal 2022 includes $50 million, $19 million and $4 million of impairment charges related to the Michael Kors, Versace and Jimmy Choo reportable segments, respectively.

Total income from operations $ 679 $ 903 $ 19

(1) Impairment of assets during Fiscal 2023 includes $110 million, $30 million, and $2 million of impairment charges related to the Jimmy Choo, Michael Kors and Versace reportable segments, respectively.

Impairment of assets during Fiscal 2022 includes $50 million, $19 million and $4 million of impairment charges related to the Michael Kors, Versace and Jimmy Choo reportable segments, respectively.

Impairment of assets during Fiscal 2021 includes $191 million, $91 million and $34 million of impairment charges related to the Jimmy Choo, Michael Kors and Versace reportable segments, respectively.

(2) COVID-19 related charges during Fiscal 2022 primarily include net inventory credits of $16 million as a result of better than expected sell-through and severance expense of $2 million, respectively.

Net inventory credits during

Fiscal 2022 is change of estimate from better than expected sell-through.

(2) COVID-19 related charges during Fiscal 2023, primarily include net inventory credits of $9 million.

COVID-19 related charges during Fiscal 2022, primarily include net inventory credits and severance expense of $16 million and $2 million, respectively.

COVID-19 related charges during Fiscal 2020, primarily include additional inventory reserves and credit losses of $92 million and $25 million, respectively.

COVID-19 related charges during Fiscal 2021, primarily include net inventory reserves and severance expense of $10 million and $24 million, respectively.

Inventory related costs are recorded within costs of goods sold and severance expense and credit losses are recorded within selling, general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

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

2022 March 27,

2023 April 2,

2022 March 27,

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The following table presents our retail stores by geographic location:

April 2, 2022 March 27, 2021

April 1, 2023 April 2, 2022

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

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Fiscal Years Ended

2022 March 27,

2023 April 2,

2022 March 27,

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Gross profit as a percent of total revenue 66.3 % 66.2 % 64.0 %

Income (loss) from operations $ 903 $ 19 $ (192)

Income (loss) from operations as a percent of total revenue 16.0 % 0.5 % (3.5) %

Income from operations $ 679 $ 903 $ 19

Income from operations as a percent of total revenue 12.1 % 16.0 % 0.5 %

Critical Accounting Policies and Estimates

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To arrive at net sales for retail, gross sales are reduced by actual customer returns, as well as by a provision for estimated future customer returns, which is based on management’s review of historical and current customer returns.

The amounts reserved for retail sales returns were $22 million, $20 million and $12 million at April 2, 2022, March 27, 2021 and March 28, 2020, respectively.

The amounts reserved for retail sales returns were $22 million, $22 million and $20 million at April 1, 2023, April 2, 2022 and March 27, 2021, respectively.

Net sales for wholesale equals gross sales, reduced by provisions for estimated future returns based on current expectations, as well as trade discounts, markdowns, allowances, operational chargebacks, and certain cooperative selling expenses.

Total sales reserves for wholesale were $70 million, $78 million and $154 million at April 2, 2022, March 27, 2021 and March 28, 2020, respectively.

Total sales reserves for wholesale were $73 million, $70 million and $78 million at April 1, 2023, April 2, 2022 and March 27, 2021, respectively.

These estimates are based on such factors as historical trends, actual and forecasted performance and market conditions, which are reviewed by management on a quarterly basis.

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Our inventory costs include amounts paid to independent manufacturers, plus duties and freight to bring the goods to the Company’s warehouses, as well as shipments to stores.

The combined total of raw materials and work in process inventory recorded on our consolidated balance sheets as of April 2, 2022 and March 27, 2021 were $31 million and $28 million, respectively.

We continuously evaluate the composition of our inventory and make adjustments when the cost of inventory is

not expected to be fully recoverable.

The combined total of raw materials and work in process recorded on our consolidated balance sheets as of April 1, 2023 and April 2, 2022 were $47 million and $31 million, respectively.

We continuously evaluate the composition of our inventory and make adjustments when the cost of inventory is not expected to be

fully recoverable.

The net realizable value of our inventory is estimated based on historical experience, current and forecasted demand and market conditions.

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This approach is dependent on many factors, including estimates of future revenue growth rates, royalty rates and discount rates.

Actual future results may differ from these estimates.

Actual future results may

differ from these estimates.

An impairment loss is recognized when the estimated fair value of the brand intangible assets is less than its carrying amount.

During the fourth quarter of Fiscal 2023, we performed our annual goodwill and indefinite-lived intangible assets impairment analysis.

Based on qualitative impairment assessment of the Michael Kors reporting units, we concluded that it is more likely than not that the fair value of the Michael Kors reporting units exceeded its carrying value and, therefore, was not impaired.

Based on a qualitative impairment assessment of the Michael Kors reporting units, we concluded that it is more likely than not that the fair value of the Michael Kors reporting units exceeded its carrying value and, therefore, was not impaired.

We elected to perform quantitative impairment analyses for the Versace and Jimmy Choo reporting units, using a combination of income and market approaches to estimate the fair values of reporting units.

We also elected to perform an impairment analysis for the Versace and Jimmy Choo brand intangible assets using an income approach to estimate the fair values.

Based on the results of these assessment, we concluded that the fair values of the Versace and Jimmy Choo reporting units and the brand intangible assets exceeded the related carrying amounts and no impairment was required.

We also elected to perform a quantitative impairment analysis for the Versace and Jimmy Choo brand intangible assets using an income approach to estimate the fair values.

Based on the results of these assessments, the Company determined there was no impairment for the Jimmy Choo Licensing reporting unit goodwill as its fair value is significantly higher than its carrying value and no impairment for the Wholesale brand intangible asset as its approximate fair value was equal to its carrying value.

Further, the Company determined that there was no impairment for the Versace reporting units goodwill as their fair values significantly exceeded the carrying values and its Retail and Wholesale brand intangible assets fair value exceeded its carrying value by approximately 10% and 5%, respectively.

The Company further concluded that the fair value of the Jimmy Choo Retail and Wholesale reporting units goodwill, along with the Jimmy Choo Retail brand indefinite-lived intangible assets, did not exceed their related carrying amounts.

The resulting impairment charges were primarily related to a higher discount rate in the current year driven by higher risk-free rates.

Accordingly, the Company recorded impairment charges of $82 million related to the Jimmy Choo Retail and Wholesale reporting units goodwill and $24 million related to the Jimmy Choo Retail brand intangible assets during Fiscal 2023.

The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive income (loss) for the fiscal year ended April 1, 2023.

In Fiscal 2022, the Company did not incur any impairment charges.

In Fiscal 2021, we recorded a goodwill impairment charge of $94 million related to the Jimmy Choo wholesale and Jimmy Choo licensing reporting units and $69 million impairment charge related to the Jimmy Choo brand intangible assets during Fiscal 2021.

We recorded a goodwill impairment charge of $171 million related to the Jimmy Choo retail and Jimmy Choo licensing reporting units and $180 million impairment charge related to the Jimmy Choo brand intangible assets during Fiscal 2020.

The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive income (loss) for the fiscal years ended March 27, 2021 and March 28, 2020.

The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive income (loss) for the fiscal year ended March 27, 2021.

See Note 8 to the accompanying financial statements for information relating to the annual impairment analysis performed during the fourth quarters of Fiscal 2023, Fiscal 2022 and Fiscal 2021.

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We use forward foreign currency exchange contracts to manage our exposure to fluctuations in foreign currency for certain transactions.

We, in our normal course of business, enter into transactions with foreign suppliers and seeks to minimize risks related to these transactions.

We employ these contracts to hedge the our cash flows, as they relate to foreign currency transactions.

We, in our normal course of business, enter into transactions with foreign suppliers and seek to minimize risks related to these transactions.

We employ these contracts to hedge our cash flows, as they relate to foreign currency transactions.

Certain of these contracts are designated as hedges for accounting purposes, while others remain undesignated.

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If the hedge is no longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings.

For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency (gain) loss in our consolidated statements of operations and comprehensive income (loss).

For those contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency loss (gain) in our consolidated statements of operations and comprehensive income (loss).

We classify cash flows relating to our forward foreign currency exchange contracts related to purchases of inventory consistently with the classification of the hedged item within cash flows from operating activities.

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Net Investment Hedges

We also use fixed-to-fixed cross currency swap agreements to hedge our net investments in foreign operations against future volatility in the exchange rates between the United States dollar and the associated foreign currencies.

We also use fixed-to-fixed cross currency swap agreements to hedge our net investments in foreign operations against future volatility in the exchange rates between different currencies.

We have elected the spot method of designating these contracts under ASU 2017-12, “Derivatives and Hedging (Topic 815):

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The net gain or loss on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income on our consolidated balance sheets.

Interest accruals and coupon payments are recognized directly in interest (income) expense, net, in our consolidated statements of operations and comprehensive income (loss).

Interest accruals and coupon payments are recognized directly in interest expense (income), net, in our consolidated statements of operations and comprehensive income (loss).

Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net investment is sold, diluted or liquidated.

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In order to mitigate counterparty credit risk, we only enter into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit exposure.

During the fourth quarter of Fiscal 2020, we terminated all of our net investment hedges related to our Euro-denominated subsidiaries.

The early termination of these hedges resulted in the receipt of $296 million in cash during the fourth quarter of Fiscal 2020.

During Fiscal 2021, the Company resumed its normal hedging program and entered into multiple fixed-to-fixed cross-currency swap agreements to hedge its net investment in Euro-denominated and Japanese Yen-denominated subsidiaries against future volatility in the exchange rate between the United States dollar and these currencies.

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These amounts are classified within investing activities in our consolidated statements of cash flows.

Interest Rate Swap Agreements

We also use interest rate swap agreements to hedge the variability of our cash flows resulting from floating interest rates on our borrowings.

When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in

the fair value are recorded in equity as a component of accumulated other comprehensive income and are reclassified into interest (income) expense, net, in the same period during which the hedged transactions affect earnings.

During the third quarter of Fiscal 2022, we terminated our only interest rate swap.

As a result, we recognized a $1 million gain within interest (income) expense, net, within our consolidated statements of operations and comprehensive income (loss).

During the first quarter of Fiscal 2023, the Company modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $1.094 billion to hedge its net investment, of which $900 million was in Euro denominated subsidiaries and $194 million was in Japanese Yen denominated subsidiaries.

The modification of these swaps resulted in the Company receiving $66 million in cash during the first quarter of Fiscal 2023.

These contracts have been designated as net investment hedges.

As of July 2, 2022, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $4 billion to hedge its net investment in Euro denominated subsidiaries (the “Euro Net Investment Hedges”) and $194 million to hedge its net investment in Japanese Yen denominated subsidiaries (the “Japanese Yen Net Investment Hedges”).

During the month of July 2022, the Euro Net Investment Hedges with aggregate notional amounts of $4 billion outstanding as of July 2, 2022 were terminated resulting in the Company receiving $237 million in cash.

During the second quarter of Fiscal 2023, the Company also entered into, and subsequently terminated, additional Euro Net Investment Hedges with aggregate notional amounts of $4 billion.

The termination of these contracts resulted in the Company receiving an additional $100 million in cash.

During the second quarter of Fiscal 2023, the Company also modified certain Japanese Yen Net Investment Hedges with notional amounts of $100 million.

The modification of these hedges resulted in the Company receiving $6 million in cash during the second quarter of Fiscal 2023.

The Company entered into additional Japanese Yen Net Investment Hedges with notional amount of $100 million.

These contracts have been designated as net investment hedges.

During the second quarter of Fiscal 2023, the Company received a total of $343 million from the termination of its Euro Net Investment Hedges and the modification of its Japanese Yen Net Investment Hedges.

During the third quarter of Fiscal 2023, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of €1 billion (approximately $1.07 billion) to hedge its net investment in GBP denominated subsidiaries (the “GBP/EUR Net Investment Hedges”).

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP denominated debt for fixed rate payments of 0% in Euro.

These contracts have maturity dates between November 2024 and November 2027 and are designated as net investment hedges.

As of April 1, 2023, the Company had Japanese Yen Net Investment Hedges with aggregate notional amounts of $294 million.

Under the terms of these contracts, the Company will exchange the semi-annual fixed rate payments on United States denominated debt for fixed rate payments of 0% to 2.665% in Japanese Yen.

These contracts have maturity dates between May 2027 and February 2051 and are designated as net investment hedges.

Certain of these contracts are supported by a credit support annex (“CSA”) which provides for collateral exchange with the earliest effective date being September 2027.

If the outstanding position of a contract exceeds a certain threshold governed by the aforementioned CSA’s, either party is required to post cash collateral.

When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method, the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in interest expense (income) in the Company’s consolidated statements of operations and comprehensive income (loss).

Accordingly, the Company recorded interest income of $38 million, $63 million and $16 million, respectively, during Fiscal 2023, Fiscal 2022 and Fiscal 2021.

Fair Value Hedges

The Company is exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans.

This primarily includes exposure to exchange rate fluctuations in the Euro and British Pound which will impact earnings on a consolidated basis.

To manage the exchange rate risk related to these balances, during the fourth quarter of Fiscal 2023 the Company entered into fair value cross-currency swap agreements to hedge its exposure in GBP denominated subsidiaries (the “GBP Fair Value Hedge”) on a Euro denominated intercompany loan.

As of April 1, 2023, the total notional values of outstanding fair value cross-currency swaps related to these loans were €1 billion (approximately $1.08 billion).

Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on GBP denominated debt for fixed rate payments of 0% in Euro.

These contracts have maturity dates between March 2025 and March 2026 and are designated as fair value hedges.

When a cross-currency swap is designated as a fair value hedge and qualifies as highly effective, the fair value hedge will be recorded at fair value each period on the Company’s consolidated balance sheets, with the difference resulting from the changes in the spot rate at hedge inception to the current period recognized in foreign currency loss (gain) on the Company’s consolidated statements of operations and comprehensive income (loss), which will offset the earnings impact of the original transaction being hedged for.

Accordingly, the Company recorded a foreign currency gain of $4 million during Fiscal 2023.

Deferred income tax assets and liabilities reflect temporary differences between the tax basis and financial reporting basis of our assets and liabilities and are determined using the tax rates and laws in effect for the periods in which the differences are expected to reverse.

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We record interest and penalties payable to relevant tax authorities as income tax expense.

In response to the COVID-19 pandemic, local governments enacted, or are in the process of enacting, measures to provide aid and economic stimulus to companies.

On March 27, 2020, the United States government enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which includes various tax provisions aimed at providing economic relief.

We realized a slight favorable cash flow impact in Fiscal 2021 as a result of the deferral of income tax payments under the CARES Act and other local government relief initiatives.

We also considered the significant adverse impact of COVID-19 on our business in assessing the realizability of our deferred tax assets.

Based on this assessment, we determined that valuation allowances of approximately $65 million were needed against a portion of our non-United States deferred tax assets in Fiscal 2020 which increased to $95 million in Fiscal 2021 and during Fiscal 2022 decreased to $36 million.

We will continue to monitor the impacts of COVID-19 on our ability to realize our deferred tax assets and on the tax provision.

Another provision of the CARES Act applicable to us is the modification to allow for a five-year carryback of net operating losses.

We recognized a $13 million benefit from a net operating loss (“NOL”) carryback claim in Fiscal 2021, which represented our provisional estimate at that time.

During Fiscal 2022, we finalized our accounting for the carryback and recognized an additional $43 million income tax benefit.

New Accounting Pronouncements

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A discussion regarding our results of operations for Fiscal 2023 compared to Fiscal 2022 is presented below.

A discussion regarding our results of operations for Fiscal 2021 compared to Fiscal 2020 can be found under Item 7 in our Annual Report on Form 10-K for the year ended March 27, 2021, filed with the SEC on May 26, 2021, which is available on the SEC’s website at www.sec.gov and our investor website at www.capriholdings.com .

A discussion regarding our results of operations for Fiscal 2022 compared to Fiscal 2021 can be found under Item 7 in our Annual Report on Form 10-K for the year ended April 2, 2022, filed with the SEC on June 1, 2022, which is available on the SEC’s website at www.sec.gov and our investor website at www.capriholdings.com .

Comparison of Fiscal 2023 with Fiscal 2022

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Fiscal Years Ended $ Change % Change % of Total

2022 March 27,

2023 April 2,

Statements of Operations Data:

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Total operating expenses 3,045 2,841 204 7.2 % 54.2 % 50.2 %

Income from operations 903 19 884 NM 16.0 % 0.5 %

Income from operations 679 903 (224) (24.8) % 12.1 % 16.0 %

Other income, net (3) (2) (1) (50.0) % (0.1) % — %

Interest (income) expense, net (18) 43 (61) NM (0.3) % 1.1 %

Foreign currency loss (gain) 8 (20) 28 NM 0.1 % (0.5) %

Income before provision for income taxes 915 3 912 NM 16.2 % 0.1 %

Interest expense (income), net 24 (18) 42 NM 0.4 % (0.3) %

Foreign currency loss 10 8 2 25.0 % 0.2 % 0.1 %

Income before provision for income taxes 648 915 (267) (29.2) % 11.5 % 16.2 %

Provision for income taxes 29 92 (63) (68.5) % 0.5 % 1.6 %

Net income (loss) 823 (63) 886 NM

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

Net income (loss) attributable to Capri $ 822 $ (62) $ 884 NM

Net income 619 823 (204) (24.8) %

Net income attributable to noncontrolling interests 3 1 2 NM

Net income attributable to Capri $ 616 $ 822 $ (206) (25.1) %

NM Not meaningful

Total Revenue

Total revenue increased $1.594 billion, or 39.3%, to $5.654 billion for Fiscal 2022, compared to $4.060 billion for Fiscal 2021, which included net favorable foreign currency effects of $25 million primarily related to the strengthening of the British Pound against the United States dollar in Fiscal 2022, as compared to Fiscal 2021.

On a constant currency basis, our total revenue increased $1.569 billion, or 38.6%.

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.

Fiscal 2022 also included approximately $70 million of incremental revenue attributable to the inclusion of the 53rd week.

Gross profit increased $1.147 billion, or 44.2%, to $3.744 billion during Fiscal 2022, compared to $2.597 billion for Fiscal 2021, which included net favorable foreign currency effects of $5 million.

Total revenue decreased $35.0 million, or 0.6%, to $5.619 billion for Fiscal 2023, compared to $5.654 billion for Fiscal 2022, which included net unfavorable foreign currency effects of $333 million as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate in Fiscal 2023, as compared to Fiscal 2022.

On a constant currency basis, our total revenue increased $298.0 million, or 5.3%.

The increase is attributable to increased retail revenues in the Americas and increased retail and wholesale in EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions for each of our brands and approximately $70 million of revenue attributable to the 53rd week in Fiscal 2022.

Gross profit decreased $20.0 million, or 0.5%, to $3.724 billion during Fiscal 2023, compared to $3.744 billion for Fiscal 2022, which included net unfavorable foreign currency effects of $230 million.

Gross profit as a percentage of total revenue increased 10 basis points to 66.3% during Fiscal 2023, compared to 66.2% during Fiscal 2022.

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.

The increase in gross profit margin was primarily attributable to a higher average unit price, partially offset by unfavorable regional sales mix.

Total Operating Expenses

Total operating expenses increased $204 million, or 7.2%, to $3.045 billion during Fiscal 2023, compared to $2.841 billion for Fiscal 2022.

Our operating expenses included a net unfavorable foreign currency impact of approximately $2 million.

Total operating expenses as a percentage of total revenue decreased to 50.2% in Fiscal 2022, compared to 63.5% in Fiscal 2021.

Our operating expenses included a net favorable foreign currency impact of approximately $198 million.

Total operating expenses as a percentage of total revenue increased to 54.2% in Fiscal 2023, compared to 50.2% in Fiscal 2022.

The components that comprise total operating expenses are detailed below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $515 million, or 25.5%, to $2.533 billion during Fiscal 2022, compared to $2.018 billion for Fiscal 2021, primarily due to increased retail store, e-commerce, corporate and marketing expenses during Fiscal 2022.

Selling, general and administrative expenses as a percentage of total revenue decreased to 44.8% during Fiscal 2022, compared to 49.7% for Fiscal 2021, 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 $38 million, or 25.0%, to $190 million for Fiscal 2022, compared to $152 million for Fiscal 2021, primarily due to an increase in professional fees related to the ERP system implementation and Capri transformation projects and an increase in compensation expense.

Selling, general and administrative expenses increased $175 million, or 6.9%, to $2.708 billion during Fiscal 2023, compared to $2.533 billion for Fiscal 2022.

As a percentage of total revenue, selling, general and administrative expenses increased to 48.2% during Fiscal 2023, compared to 44.8% for Fiscal 2022, primarily due to increased marketing and unallocated corporate expenses and deleverage of operating expenses on lower revenue for Fiscal 2023.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $43 million, or 22.6%, to $233 million for Fiscal 2023, compared to $190 million for Fiscal 2022, primarily due to an increase in professional fees and information technology costs related to the ongoing ERP system implementation and Capri transformation projects.

Depreciation and Amortization

Depreciation and amortization decreased $14 million, or 7.3%, to $179 million during Fiscal 2023, compared to $193 million for Fiscal 2022.

Depreciation and amortization decreased to 3.2% as a percentage of total revenue during Fiscal 2023, compared to 3.4% for Fiscal 2022.

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 3.4% as a percentage of total revenue during Fiscal 2022, compared to 5.2% for Fiscal 2021 primarily due to higher revenues during Fiscal 2022.

Impairment of Assets

During Fiscal 2022, we recognized asset impairment charges of $73 million, primarily related to the impairment of operating lease right-of-use assets.

During Fiscal 2021, we recognized asset impairment charges of approximately $316 million, primarily related to the impairment of Jimmy Choo goodwill and its brand intangible assets, as well as the impairment of operating lease right-of-use assets (see Note 13 to the accompanying consolidated financial statements for additional information).

During Fiscal 2023, we recognized asset impairment charges of $142 million, primarily related to the impairment of the Jimmy Choo Retail and Wholesale reporting units goodwill and Jimmy Choo brand intangible assets, as well as the impairment of certain operating lease right-of-use assets.

During Fiscal 2022, we recognized asset impairment charges of approximately $73 million, primarily related to the impairment of operating lease right-of-use assets (see Note 13 to the accompanying consolidated financial statements for additional information).

Restructuring and Other Charges

During Fiscal 2022, we recognized restructuring and other charges of $42 million, which included other costs of $33 million, primarily related to equity awards associated with the acquisition of Versace and severance for an executive officer and $9 million related to our Capri Retail Store Optimization Program (see Note 10 to the accompanying consolidated financial statements for additional information).

During Fiscal 2021, we recognized restructuring and other charges of $32 million, which included other costs of $27 million, primarily related to equity awards associated with the acquisition of Versace and the closure of certain corporate locations and $5 million related to our Capri Retail Store Optimization Program.

During Fiscal 2023, we recognized restructuring and other charges of $16 million, primarily relating to equity awards associated with the acquisition of Versace (see Note 10 to the accompanying consolidated financial statements for additional information).

Income from Operations

As a result of the foregoing, income from operations increased $884 million to $903 million during Fiscal 2022, compared to $19 million for Fiscal 2021.

Income from operations as a percentage of total revenue increased to 16.0% in Fiscal 2022, compared to 0.5% in Fiscal 2021.

As a result of the foregoing, income from operations decreased $224 million to $679 million during Fiscal 2023, compared to $903 million for Fiscal 2022.

Income from operations as a percentage of total revenue decreased to 12.1% in Fiscal 2023, compared to 16.0% in Fiscal 2022.

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

Interest (Income) Expense, net

During Fiscal 2022, we recognized $18 million of interest income compared to $43 million of interest expense during Fiscal 2021.

The $61 million improvement in interest (income) expense, net, is primarily due to an increase of interest income from higher average notional amounts outstanding on our net investment hedges in the current year and a decrease in interest expense attributable to lower average borrowings outstanding (see Note 11 and Note 14 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

During Fiscal 2022 and Fiscal 2021, we recognized a net foreign currency loss of $8 million and a net foreign currency gain of $20 million, respectively, primarily attributable to the remeasurement of intercompany loans with certain of our subsidiaries.

Interest Expense (Income), net

During Fiscal 2023, we recognized $24 million of interest expense compared to $18 million of interest income during Fiscal 2022.

The $42 million increase in interest expense (income), net, is primarily due to higher effective interest rates on our outstanding debt, higher average borrowings outstanding and lower interest income from our net investment hedges, partially offset by higher interest income earned on our cash and cash equivalents (see Note 11 and Note 14 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss

During Fiscal 2023 and Fiscal 2022, we recognized a net foreign currency loss of $10 million and $8 million, respectively, primarily attributable to the remeasurement of intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

During Fiscal 2023, we recognized $29 million of income tax expense on pre-tax income of $648 million compared with $92 million of income tax expense on a pre-tax income of $915 million for Fiscal 2022.

Our effective tax rate for Fiscal 2022 was significantly lower than our effective tax rate in Fiscal 2021, and not a meaningful or comparable metric, primarily due to the relationship between our income tax expense and minimal pre-tax income in the prior year as compared to the current year.

The Fiscal 2022 income tax expense was higher than Fiscal 2021 primarily due to the increase in pre-tax income and increases in uncertain tax positions during Fiscal 2022.

The increase was partially offset by a release of a valuation allowance in certain European subsidiaries, the impact of recently enacted tax legislation in Italy which allowed the Company to reduce its deferred tax liabilities, as well as a more favorable effect of our global financing activities during Fiscal 2022 compared to Fiscal 2021.

As a result, the effect that discrete tax amounts have on the effective income tax rate during the year is not comparable.

See Note 17 to the accompanying consolidated financial statements for additional information.

Our effective tax rate for Fiscal 2023 was lower than our effective tax rate in Fiscal 2022 primarily due to decreases in uncertain tax positions as well as a more favorable effect of our global financing activities during Fiscal 2023 as compared to Fiscal 2022.

In addition, in Fiscal 2022, the Company recognized a benefit from the impact of enacted tax legislation in Italy which allowed the Company to reduce its deferred tax liabilities as well as a United States net operating loss (“NOL”) benefit realized which was not recurring in Fiscal 2023.

The global financing activities are related to our previously disclosed 2014 move of our principal executive office from Hong Kong to the U.K.

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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

During Fiscal 2022, we recorded net income attributable to noncontrolling interest of $1 million and during Fiscal 2021, 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 (Loss) Attributable to Capri

As a result of the foregoing, during Fiscal 2022 our net income attributable to Capri increased $884 million to $822 million, compared to a net loss of $62 million for Fiscal 2021.

Net Income Attributable to Capri

As a result of the foregoing, during Fiscal 2023 our net income attributable to Capri decreased $206 million to $616 million, compared to net income of $822 million for Fiscal 2022.

Segment Information

Fiscal Years Ended % Change

2022 March 27,

2023 April 2,

2022 $ Change As Reported Constant

Revenues $ 1,106 $ 1,088 $ 18 1.7 % 13.8 %

Income from operations 185 21 164 NM

Income from operations $ 152 $ 185 $ (33) (17.8) %

Operating margin 13.7 % 17.0 %

NM Not meaningful

Versace revenues increased $370 million, or 51.5%, to $1.088 billion for Fiscal 2022, compared to $718 million for Fiscal 2021, which included unfavorable foreign currency effects of $9 million.

On a constant currency basis, revenue increased $379 million, or 52.8%, 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.

Versace revenues increased $18 million, or 1.7%, to $1.106 billion for Fiscal 2023, compared to $1.088 billion for Fiscal 2022, which included unfavorable foreign currency effects of $132 million.

On a constant currency basis, revenue increased $150 million, or 13.8%, primarily attributable to increased retail revenue in the Americas and EMEA and wholesale shipments in EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

During Fiscal 2023, Versace recorded income from operations of $152 million compared to $185 million for Fiscal 2022.

Operating margin increased from 2.9% for Fiscal 2021 to 17.0% for Fiscal 2022, primarily due to a higher average unit price and leveraging of operating expenses due to higher revenue.

Operating margin decreased from 17.0% for Fiscal 2022 to 13.7% for Fiscal 2023, primarily due to increased retail store costs from a higher store count and increased employee costs.

Fiscal Years Ended % Change

2022 March 27,

2023 April 2,

2022 $ Change As Reported Constant

Revenues $ 633 $ 613 $ 20 3.3 % 11.4 %

Income (loss) from operations 13 (55) 68 NM

Income from operations $ 38 $ 13 $ 25 NM

Operating margin 6.0 % 2.1 %

NM Not meaningful

Jimmy Choo revenues increased $195 million, or 46.7%, to $613 million for Fiscal 2022, compared to $418 million for Fiscal 2021, which included favorable foreign currency effects of $26 million.

On a constant currency basis, revenue increased $169 million, or 40.4%, 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.

Fiscal 2022 also included incremental revenue attributable to the inclusion of the 53rd week.

Income (Loss) from Operations

During Fiscal 2022, Jimmy Choo recorded income from operations of $13 million compared to a loss from operations of $55 million for Fiscal 2021.

Operating margin improved from (13.2)% for Fiscal 2021 to 2.1% for Fiscal 2022, primarily due to a higher average unit price and leveraging of operating expenses due to higher revenue.

Jimmy Choo revenues increased $20 million, or 3.3%, to $633 million for Fiscal 2023, compared to $613 million for Fiscal 2022, which included unfavorable foreign currency effects of $50 million.

On a constant currency basis, revenue increased $70 million, or 11.4%, primarily attributable to increased revenue in the Americas and EMEA and increased licensing revenue, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Income from Operations

During Fiscal 2023, Jimmy Choo recorded income from operations of $38 million compared to $13 million for Fiscal 2022.

Operating margin increased from 2.1% for Fiscal 2022 to 6.0% for Fiscal 2023, primarily due to a higher average unit price and leveraging of operating expenses on higher revenue.

Fiscal Years Ended % Change

2022 March 27,

2023 April 2,

2022 $ Change As Reported Constant

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Operating margin 22.4 % 25.4 %

Michael Kors revenues increased $1.029 billion, or 35.2%, to $3.953 billion for Fiscal 2022, compared to $2.924 billion for Fiscal 2021, which included favorable foreign currency effects of $8 million.

On a constant currency basis, revenue increased $1.021 billion, or 34.9%, 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.

Fiscal 2022 also included incremental revenue attributable to the inclusion of the 53rd week.

Michael Kors revenues decreased $73 million, or 1.8%, to $3.880 billion for Fiscal 2023, compared to $3.953 billion for Fiscal 2022, which included unfavorable foreign currency effects of $151 million.

On a constant currency basis, revenue increased $78 million, or 2.0%, primarily attributable to increased retail revenue in the Americas, partially offset by decreased revenue in Greater China due to the impact of COVID-19 related disruptions.

Income from Operations

During Fiscal 2022, Michael Kors recorded income from operations of $1.005 billion compared to $595 million for Fiscal 2021.

Operating margin increased from 20.3% for Fiscal 2021 to 25.4% for Fiscal 2022, 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.

During Fiscal 2023, Michael Kors recorded income from operations of $868 million compared to $1.005 billion for Fiscal 2022.

Operating margin decreased from 25.4% for Fiscal 2022 to 22.4% for Fiscal 2023, primarily due to increased marketing investments and deleveraging of operating expenses on lower revenue.

Liquidity and Capital Resources

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Our primary use of this liquidity is to fund the ongoing cash requirements, including our working capital needs and capital investments in our business, debt repayments, acquisitions, returns of capital, including share repurchases and other corporate activities.

We believe that the cash generated from our 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 believe that the cash generated from our 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 IT system development, e-commerce and marketing initiatives.

We spent $226 million on capital expenditures during Fiscal 2023 and expect to spend approximately $260 million during Fiscal 2024.

This anticipated increase reflects continued expenditures related to our retail operations (including e-commerce), ERP system implementation and Capri transformation programs.

The majority of the Fiscal 2022 expenditures related to our retail operations (including e-commerce) and our corporate offices.

The majority of the Fiscal 2023 expenditures related to our retail operations (including e-commerce), ERP system implementation and Capri transformation programs.

The Capri transformation program represents a multi-year, multi-project initiative extending through Fiscal 2026 intended to improve the operating effectiveness and efficiency of our organization by creating best in class shared platforms across our brands and by expanding our digital capabilities.

These initiatives cover multiple aspects of our operations including supply chain, marketing, omni-channel customer experience, e-commerce, data analytics and IT infrastructure.

Over the next three fiscal years, we expect expenditures up to $220 million related to these efforts.

The Company is also in progress with a multi-year ERP implementation which includes accounting, finance and wholesale and retail inventory solutions in order to create standardized finance IT applications across our organization.

This ERP implementation will continue through Fiscal 2026 and we expect expenditures up to $170 million over the next three fiscal years.

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

2022 March 27,

2023 April 2,

Balance Sheet Data:

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Fiscal Years Ended

2022 March 27,

2023 April 2,

2022 March 27,

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Effect of exchange rate changes (94) (24) 12

Net (decrease) increase in cash, cash equivalents and restricted cash $ (62) $ (358) $ 420

Net increase (decrease) in cash, cash equivalents and restricted cash $ 84 $ (62) $ (358)

Cash Provided by Operating Activities

Cash provided by operating activities increased $67 million to $771 million during Fiscal 2023, as compared to $704 million for Fiscal 2022, which was as a result of the improvement in our working capital partially offset by a decrease in our net income after non-cash adjustments compared to prior year.

The changes in our working capital were primarily due to the stabilization of inventory levels compared to prior year.

Cash provided by operating activities increased $80 million to $704 million during Fiscal 2022, as compared to $624 million for Fiscal 2021, which was due to 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 and fluctuations in the timing of payments and receipts when compared to the prior year.

Cash provided by operating activities decreased $235 million to $624 million during Fiscal 2021, as compared to $859 million for Fiscal 2020, which was due to a decrease in our net income after non-cash adjustments, primarily driven by a decrease in impairments and a decrease in net loss, partially offset by increases related to changes in our working capital, primarily attributable to fluctuations in the timing of payments and receipts due to the impact of COVID-19.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $183 million during Fiscal 2023, as compared to $58 million during Fiscal 2022.

The $125 million increase in cash provided by investing activities was primarily attributable to higher cash received on the settlement of net investment hedges of $220 million during Fiscal 2023, partially offset by higher capital expenditures of $95 million compared to prior year due to ERP system implementations, increased Corporate investments related to Capri transformation programs and increased investments in our retail stores.

Net cash provided by investing activities was $58 million during Fiscal 2022, as compared to net cash used in investing activities of $124 million during Fiscal 2021.

The $182 million increase in cash provided by investing activities was primarily attributable to $189 million cash received on the settlement of certain net investment hedges during Fiscal 2022.

Net cash used in investing activities was $124 million during Fiscal 2021, as compared to net cash provided by investing activities of $62 million during Fiscal 2020.

The $186 million increase in cash used in investing activities was primarily attributable to a $298 million settlement of net investment hedges during Fiscal 2020, partially offset by a $112 million decrease in capital expenditures compared to Fiscal 2020.

The $182 million increase in cash provided by investing activities was primarily attributable to a $189 million cash received on the settlement of certain net investment hedges during Fiscal 2022.

Cash Used in Financing Activities

Net cash used in financing activities was $776 million during Fiscal 2023, as compared to $800 million during Fiscal 2022.

The decrease in cash used by financing activities of $70 million was primarily due to a decrease in net debt repayments of $681 million, higher cash proceeds from other financing activities and employee option exercises, partially offset by an increase of $660 million in cash payments to repurchase our ordinary shares during Fiscal 2022.

The decrease in cash used by financing activities of $24 million was primarily due to an increase in net debt borrowings of $774 million, partially offset by a $703 million increase in cash payments to repurchase our ordinary shares.

Net cash used in financing activities was $800 million during Fiscal 2022, as compared to $870 million during Fiscal 2021.

The increase in cash used by financing activities of $373 million was primarily due to an increase in net debt repayments of $474 million, partially offset by a decrease of $101 million in cash payments to repurchase our ordinary shares during Fiscal 2021.

Debt Facilities

The following table presents a summary of the Company’s borrowing capacity and amounts outstanding as of April 2, 2022 and March 27, 2021 (dollars in millions):

The following table presents a summary of the Company’s borrowing capacity and amounts outstanding as of April 1, 2023 and April 2, 2022 (dollars in millions):

Fiscal Years Ended

2022 March 27,

Senior Secured Revolving Credit Facility:

2023 April 2,

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

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Remaining availability $ 623 $ 804

Term Loan Facility ($1.6 billion)

Versace Term Loan (450 Million Euro)

Borrowings outstanding, net of debt issuance costs (3)

Remaining availability $ — $ —

364 Credit Facility ($230 million)

Total availability $ — $ 230

Remaining availability $ — $ 230

Senior Notes due 2024

Borrowings Outstanding, net of debt issuance costs and discount amortization (2)

2018 Term Loan ($1.6 billion)

Borrowings Outstanding, net of debt issuance costs (4)

Other Borrowings (5)

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

Borrowings outstanding (0.0 billion and 1.0 billion Japanese Yen) (5)

Remaining availability (1.0 billion and 0.0 billion Japanese Yen) $ 8 $ —

Borrowings outstanding

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

Versace Uncommitted Credit Facility:

Total availability (40 million and 48 million Euro) (6)

Borrowings outstanding (0 million Euro) — —

Borrowings outstanding — —

Remaining availability (40 million and 48 million Euro) $ 43 $ 52

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Total remaining availability $ 694 $ 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 was previously waived through the fiscal quarter ending June 26, 2021.

We terminated the waiver period effective May 26, 2021.

Effective as of that date, the Company was required to comply with the quarterly maximum net leverage ratio test of 4.00 to 1.0.

As of April 2, 2022 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 April 1, 2023 and April 2, 2022, we were in compliance with all covenants related to our agreements then in effect governing our debt.

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

(2) As of April 1, 2023 and April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(3) On December 5, 2022, Gianni Versace S.r.l., our wholly owned subsidiary, entered into a credit facility, which provided a senior unsecured term loan in an aggregate principal amount of €450 million (approximately $488 million).

As of April 1, 2023, all amounts are recorded as long-term debt in our consolidated balance sheets.

As of March 27, 2021, all amounts were 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 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.

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) As of April 1, 2023, we no longer had an outstanding balance under the 2018 Term Loan as it was repaid.

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

(5) The balance as of April 1, 2023 consists of primarily of $4 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets and $11 million related to the sale of certain Versace tax receivables, with $1 million and $10 million recorded within short-term debt and long-term debt, respectively, 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 recorded within short-term debt and long-term debt, respectively, in our consolidated balance sheets and $3 million of other loans recorded as long-term debt in our consolidated balance sheets.

(6) The balance as of April 1, 2023 represents the total availability of the credit facility, which excludes bank guarantees.

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

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

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Share Repurchase Program

The following table presents our treasury share repurchases during the fiscal years ended April 2, 2022 and March 27, 2021 (dollars in millions):

The following table presents our treasury share repurchases during the fiscal years ended April 1, 2023 and April 2, 2022 (dollars in millions):

Fiscal Years Ended

2022 March 27,

2023 April 2,

Cost of shares repurchased under share repurchase program $ 1,350 $ 650

4 unchanged sentences

27,657,875 11,218,404

During the first quarter of Fiscal 2021, the Company suspended its $500 million share-repurchase program in response to the continued impact of the COVID-19 pandemic.

See Note 15 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.

As of April 2, 2022, the remaining availability under the Fiscal 2022 Plan was $500 million.

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

The program may be suspended or discontinued at any time.

On June 1, 2022, we announced that its Board of Directors has terminated our Fiscal 2022 Plan, with $500 million of availability remaining, and authorized a new share repurchase program 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.

During the first quarter of Fiscal 2022, the Company reinstated its $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.

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

On June 1, 2022, the Board of Directors terminated our Fiscal 2022 Plan, with $400 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.

On November 9, 2022, the Company announced that its Board of Directors approved a new share repurchase program (the “Existing Share Repurchase Plan”) of up to $1 billion of its outstanding ordinary shares, providing additional capacity to return cash to shareholders over the longer term.

This new two-year program replaced the Fiscal 2023 Plan which had

$250 million of availability remaining.

As of April 1, 2023, the remaining availability under the Company’s share repurchase program was $400 million.

Share repurchases may be made in open market or privately negotiated transactions and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors.

The program may be suspended or discontinued at any time.

See Note 15 and Note 20 to the accompanying consolidated financial statements for additional information.

See Note 15 to the accompanying consolidated financial statements for additional information.

Contractual Obligations and Commercial Commitments

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Total $ 1,358 $ 1,174 $ 1,759 $ 427 $ 4,718

(1) Beginning in Fiscal 2023, we will be in an interest income position, therefore we would not have interest expense obligations due through the above periods.

(1) Beginning in Fiscal 2027, we expect to be in an interest income position, therefore we would not expect to have net interest expense obligations through the above periods.

Operating lease obligations represent equipment leases and the minimum lease rental payments due under non-cancelable operating leases for our real estate locations globally.

In addition to the above amounts, we are typically required to pay real estate taxes, contingent rent based on sales volume and other occupancy costs relating to leased properties for our retail stores.

Interest, net represents the estimated net interest expense associated with our term loan based on the current interest rate and interest from our interest rate swap.

It also includes the estimated net interest income from our net investment hedges.

Interest, net represents the estimated net interest expense associated with our term loan based on the current interest rate.

It also includes the estimated net interest income from our net investment hedges and fair value hedges.

Inventory purchase obligations represent contractual obligations for future purchases of inventory.

7 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis