What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-02-08 · 136 added, 296 removed, 226 unchanged (66% of the section changed)

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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 interim report.

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.

This report contains statements which are, or may be deemed to be, “forward-looking statements.” Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri 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, including that our estimates could materially differ if retail stores are forced to close, or if there are further supply chain disruptions, including production delays and increased costs, changes in consumer traffic and retail trends;

higher consumer debt levels, recession and inflationary pressures;

levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition and to successfully execute our growth strategies;

the risk of disruptions to the Company’s businesses;

risks associated with operating in international markets and our global sourcing activities;

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;

These risks, uncertainties and other factors include changes in consumer traffic and retail trends;

high consumer debt levels, recession and inflationary pressures;

loss of market share and industry competition;

the impact of the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under Capri’s credit agreement, Capri’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 Capri’s businesses;

risks associated with operating in international markets and our global sourcing activities, including disruptions or delays in manufacturing or shipments;

the risk of cybersecurity threats and privacy of data security breaches;

the negative effects of events on the market price of Capri’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;

the risk of litigation and/or regulatory actions related to Capri’s businesses;

fluctuations in demand for Capri’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/or pursuant to Rule 10b5-1 trading plans, 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;

loss of market share and industry competition;

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 Capri’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash;

fluctuations in the capital markets;

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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 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.

and general, local and global economic, political, business and market conditions including acts of war and other geopolitical conflicts;

the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed transaction that could delay or result in the termination of the proposed transaction, the occurrence of any other event, change or other circumstances that could give rise to the termination of the merger agreement entered into in connection with the proposed transaction, the possibility that Capri’s shareholders may not approve the proposed transaction, the risk that the parties to the merger agreement may not be able to satisfy the conditions to the proposed transaction in a timely manner or at all, risks related to disruption of management time from ongoing business operations due to the proposed transaction, the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of Capri’s ordinary shares, the risk of any unexpected costs or expenses resulting from the proposed transaction, the risk of any litigation relating to the proposed transaction, the risk that the proposed transaction and its announcement could have an adverse effect on the ability of Capri to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, shareholders and other business relationships and on its operating results and business generally, and the risk the pending proposed transaction could divert the attention of Capri’s management;

as well as those risks that are outlined in Capri’s disclosure filings and materials, which you can find on http://www.capriholdings.com, such as its Form 10-K, Form 10-Q and Form 8-K reports that have been filed with the SEC.

Please consult these documents for a more complete understanding of these risks and uncertainties.

Any forward-looking statement in this report speaks only as of the date made and Capri disclaims any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.

Capri Holdings is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors.

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Macroeconomic conditions and inflationary pressures.

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

While our business in Russia and Ukraine represented less than 1% of our total net sales for Fiscal 2022, the war in Ukraine that began in February 2022 has created significant economic uncertainty in the region.

We stopped all wholesale shipments to Russia and our third-party partners are winding down retail operations in Russia, including through the closure of our retail stores in the territory.

The war has also caused broader macroeconomic implications that we expect to continue for the foreseeable future, including the continued weakening of the Euro against the US dollar and other foreign currency volatility, 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 are adversely impacting our earnings.

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.

Global economic conditions and the related impact on levels of consumer spending worldwide impacted our business in the first quarter of Fiscal 2024, 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, which is expected to continue in the near term.

COVID-19 Pandemic.

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

The situation continues to be very volatile and 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.

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

Through 2019, the personal luxury goods market grew at a mid-single digit 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.

However, in 2020, due to the impact of the COVID-19 crisis, the personal luxury goods market declined 23%.

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.

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

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

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

Retail Fleet Optimization .

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.

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.

Foreign currency fluctuation.

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

Our consolidated operations are impacted by the relationships between our reporting currency, the United States dollar, and those of our non-United States subsidiaries whose functional/local currency is other than the United States dollar, primarily the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian dollar, among others.

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 may continue during Fiscal 2023.

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 and increased transportation costs, 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.

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 April 1, 2023 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.

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

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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 United States, Canada, 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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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.

In addition, certain other costs are not allocated to segments, including restructuring and other income (expense) and COVID-19 related expenses.

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 from operations by segment for the three and nine months ended December 31, 2022 and December 25, 2021 (in millions):

Three Months Ended Nine Months Ended

2022 December 25,

2021 December 31,

2022 December 25,

The following table presents our total revenue and income from operations by segment for the three months ended July 1, 2023 and July 2, 2022 (in millions):

Three Months Ended

Total revenue:

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Corporate expenses

(56) (37) (171) (123)

Impairment of assets (1)

(1) — (12) (33)

Restructuring and other charges (5) (14) (11) (25)

COVID-19 related charges 2 (1) 6 7

Impact of war in Ukraine 3 — 3 —

Restructuring and other income (expense) 2 (3)

COVID-19 related expenses — 1

Total income from operations $ 80 $ 231

(1) Impairment of assets during the nine months ended December 31, 2022 and December 25, 2021, respectively, primarily related to operating lease right-of-use assets at certain Michael Kors store locations.

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

2022 December 25,

Number of full price retail stores (including concessions):

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The following table presents our retail stores by geographic location:

December 31, 2022 December 25, 2021

July 1, 2023 July 2, 2022

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

2022 December 25, 2021 December 31,

2022 December 25, 2021

Three Months Ended

Total revenue $ 1,229 $ 1,360

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Results of Operations

Comparison of the three months ended December 31, 2022 with the three months ended December 25, 2021

The following table details the results of our operations for the three months ended December 31, 2022 and December 25, 2021, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Comparison of the three months ended July 1, 2023 with the three months ended July 2, 2022

The following table details the results of our operations for the three months ended July 1, 2023 and July 2, 2022, 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

2022 December 25,

2021 December 31,

2022 December 25,

Statements of Operations Data:

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Depreciation and amortization 45 45 — — % 3.7 % 3.3 %

Impairment of assets 1 — 1 NM 0.1 % — %

Restructuring and other charges 5 14 (9) (64.3) % 0.3 % 0.9 %

Restructuring and other (income) expense (2) 3 (5) NM (0.2) % 0.2 %

Total operating expenses 732 670 62 9.3 % 59.6 % 49.3 %

Income from operations 80 231 (151) (65.4) % 6.5 % 17.0 %

Other income, net (1) — (1) NM (0.1) % — %

Other expense, net 1 — 1 NM 0.1 % — %

Interest expense (income), net 8 (4) 12 NM 0.7 % (0.3) %

Foreign currency gain (3) (4) 1 (25.0) % (0.2) % (0.2) %

Foreign currency loss 21 4 17 NM 1.7 % 0.3 %

Income before income taxes 50 231 (181) (78.4) % 4.1 % 17.0 %

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Total Revenue

Total revenue decreased $97 million, or 6.0%, to $1.512 billion for the three months ended December 31, 2022, compared to $1.609 billion for the three months ended December 25, 2021, which included net unfavorable foreign currency effects of approximately $89 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 December 31, 2022.

Total revenue decreased $131 million, or 9.6%, to $1.229 billion for the three months ended July 1, 2023, compared to $1.360 billion for the three months ended July 2, 2022, which included net unfavorable foreign currency effects of approximately $5 million primarily as a result of the strengthening of the United States dollar compared to the Chinese Renminbi and Japanese Yen partially offset by weakening of the United States Dollar against the Euro for the three months ended July 1, 2023.

On a constant currency basis, our total revenue decreased $126 million, or 9.3%.

The decrease is attributable to lower wholesale revenues throughout the Americas and EMEA and decreased revenues in Greater China due to COVID-19 related disruptions for each of our brands.

Gross profit decreased $43 million, or 4.1%, to $1.005 billion for the three months ended December 31, 2022, compared to $1.048 billion for the three months ended December 25, 2021, which included net unfavorable foreign currency effects of $60 million.

Gross profit as a percentage of total revenue was 66.5% and 65.1% for the three months ended December 31, 2022 and December 25, 2021, respectively.

Our gross profit margin increased primarily due to lower supply chain costs for the three months ended December 31, 2022, as compared to the three months ended December 25, 2021.

Total Operating Expenses

Total operating expenses increased $52 million, or 7.3%, to $769 million for the three months ended December 31, 2022, compared to $717 million for the three months ended December 25, 2021.

Our operating expenses included a net favorable foreign currency impact of approximately $55 million.

Total operating expenses increased to 50.9% as a percentage of total revenue for the three months ended December 31, 2022, compared to 44.6% for the three months ended December 25, 2021.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $64 million, or 9.8%, to $720 million for the three months ended December 31, 2022, compared to $656 million for the three months ended December 25, 2021, primarily due to increased marketing and unallocated corporate expenses for the three months ended December 31, 2022.

Selling, general, and administrative expenses as a percentage of total revenue increased to 47.6% for the three months ended December 31, 2022, compared to 40.8% for the three months ended December 25, 2021, primarily due to deleverage of costs on lower revenue for the three months ended December 31, 2022, as compared to the three months ended December 25, 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 51.4%, to $56 million for the three months ended December 31, 2022 as compared to $37 million for the three months ended December 25, 2021, 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 $4 million, or 8.5%, to $43 million for the three months ended December 31, 2022, compared to $47 million for the three months ended December 25, 2021.

As a percentage of total revenue, depreciation and amortization decreased to 2.8% for the three months ended December 31, 2022, compared to 2.9% for the three months ended December 25, 2021.

Impairment of Assets

During the three months ended December 31, 2022, we recognized asset impairment charges of $1 million, which primarily related to operating lease right-of-use assets at a Jimmy Choo store location.

During the three months ended December 25, 2021, we did not recognize any impairment charges.

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

Restructuring and Other Charges

We recognized restructuring and other charges of $5 million and $14 million for the three months ended December 31, 2022 and December 25, 2021, respectively.

The charges are primarily related to equity awards associated with the acquisition of Versace.

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

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 decreased $95 million, to $236 million for three months ended December 31, 2022, compared to $331 million for the three months ended December 25, 2021.

Income from operations as a percentage of total revenue decreased to 15.6% for the three months ended December 31, 2022, compared to 20.6% for the three months ended December 25, 2021.

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

Interest Expense (Income), net

For the three months ended December 31, 2022, we recognized $12 million of interest expense compared to $7 million of interest income for the three months ended December 25, 2021.

The $19 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 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Gain

For the three months ended December 31, 2022 and December 25, 2021, we recognized a net foreign currency gain of $3 million and $4 million, respectively, primarily attributable to intercompany transactions among our subsidiaries.

Provision for Income Taxes

The provision for income taxes was $3 million for the three months ended December 31, 2022, compared to $19 million for the three months ended December 25, 2021.

Our effective tax rates were 1.3% and 5.6% for the three months ended December 31, 2022 and December 25, 2021, respectively.

In the current year, the decrease in our effective tax rate was primarily related to the release of a valuation allowance in the United Kingdom.

In the prior year, our effective tax rate included a favorable impact from a net operating loss carryback claim made in the United States as a result of COVID-19 related losses.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the third quarter of Fiscal 2023.

Our effective tax rate may fluctuate from time to time due to the effects of changes in United States federal, 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 Attributable to Capri

As a result of the foregoing, our net income decreased $97 million to $225 million for the three months ended December 31, 2022, compared to $322 million for the three months ended December 25, 2021.

Segment Information

Three Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

Reported Constant

Revenues $ 249 $ 251 $ (2) (0.8) % 11.2 %

Income from operations $ 24 $ 32 $ (8) (25.0) %

Operating margin 9.6 % 12.7 %

Versace revenues decreased $2 million, or 0.8%, to $249 million for the three months ended December 31, 2022, compared to $251 million for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $30 million.

On a constant currency basis, revenue increased $28 million, or 11.2%, primarily attributable to increased retail revenue and higher wholesale shipments in EMEA, partially offset by decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended December 31, 2022, Versace recorded income from operations of $24 million, compared to $32 million for the three months ended December 25, 2021.

Operating margin decreased from 12.7% for the three months ended December 25, 2021, to 9.6% for the three months ended December 31, 2022, primarily due to higher employee costs.

Three Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

Reported Constant

Revenues $ 168 $ 178 $ (10) (5.6) % 3.4 %

Income from operations $ 18 $ 16 $ 2 12.5 %

Operating margin 10.7 % 9.0 %

Jimmy Choo revenues decreased $10 million, or 5.6%, to $168 million for the three months ended December 31, 2022, compared to $178 million for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $16 million.

On a constant currency basis, revenue increased $6 million, or 3.4%, primarily attributable to increased revenue 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 December 31, 2022, Jimmy Choo recorded income from operations of $18 million, compared to $16 million for the three months ended December 25, 2021.

Operating margin increased from 9.0% for the three months ended December 25, 2021 to 10.7% for the three months ended December 31, 2022, primarily due to higher average unit price partially offset by deleverage of expense on lower revenues.

primarily attributable to lower revenues in the Americas, partially offset by increased revenues in Greater China for each of our brands.

Three Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

(in millions) July 1,

2022 $ Change As

Reported Constant

Revenues $ 1,095 $ 1,180 $ (85) (7.2) % (3.6) %

Income from operations $ 251 $ 335 $ (84) (25.1) %

Operating margin 22.9 % 28.4 %

Michael Kors revenues decreased $85 million, or 7.2%, to $1.095 billion for the three months ended December 31, 2022, compared to $1.180 billion for the three months ended December 25, 2021, which included unfavorable foreign currency effects of $43 million.

On a constant currency basis, revenue decreased $42 million, or 3.6%, primarily due to decreased wholesale revenues throughout the Americas and EMEA and decreased revenues in Greater China due to COVID-19 related disruptions.

Income from Operations

For the three months ended December 31, 2022, Michael Kors recorded income from operations of $251 million, compared to $335 million for the three months ended December 25, 2021.

Operating margin decreased from 28.4% for the three months ended December 25, 2021, to 22.9% for the three months ended December 31, 2022, primarily due to increased marketing investments and deleverage of expenses on lower revenues partially offset by lower supply chain costs.

Results of Operations

Comparison of the nine months ended December 31, 2022 with the nine months ended December 25, 2021

The following table details the results of our operations for the nine months ended December 31, 2022 and December 25, 2021, 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

2022 December 25,

2021 December 31, 2022 December 25, 2021

Statements of Operations Data:

Total revenue $ 4,284 $ 4,162 $ 122 2.9 %

Cost of goods sold 1,427 1,374 53 3.9 % 33.3 % 33.0 %

Gross profit 2,857 2,788 69 2.5 % 66.7 % 67.0 %

Selling, general and administrative expenses 1,984 1,800 184 10.2 % 46.3 % 43.2 %

Depreciation and amortization 131 146 (15) (10.3) % 3.1 % 3.5 %

Impairment of assets 12 33 (21) (63.6) % 0.3 % 0.8 %

Restructuring and other charges 11 25 (14) (56.0) % 0.3 % 0.6 %

Total operating expenses 2,138 2,004 134 6.7 % 49.9 % 48.1 %

Income from operations 719 784 (65) (8.3) % 16.8 % 18.8 %

Other income, net (2) (2) — — % — % — %

Interest expense (income), net 13 (11) 24 NM 0.3 % (0.3) %

Foreign currency (gain) loss (10) 1 (11) NM (0.2) % — %

Income before income taxes 718 796 (78) (9.8) % 16.8 % 19.1 %

Provision for income taxes

66 54 12 22.2 % 1.5 % 1.3 %

Net income 652 742 (90) (12.1) %

Net income attributable to noncontrolling interest 2 1 1 100.0 %

Net income attributable to Capri $ 650 $ 741 $ (91) (12.3) %

NM Not meaningful

Versace $ 259 $ 275 $ (16) (5.8) % (5.8) %

Jimmy Choo 183 172 11 6.4 % 7.0 %

Michael Kors 787 913 (126) (13.8) % (13.4) %

Total revenue $ 1,229 $ 1,360 $ (131) (9.6) % (9.3) %

Total revenue increased $122 million, or 2.9%, to $4.284 billion for the nine months ended December 31, 2022, compared to $4.162 billion for the nine months ended December 25, 2021, which included net unfavorable foreign currency effects of approximately $288 million, as a result of the strengthening of the U.S.

dollar compared to all major currencies in which we operate for the nine months ended December 31, 2022.

On a constant currency basis, our total revenue increased $410 million, or 9.9%.

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 $69 million, or 2.5%, to $2.857 billion for the nine months ended December 31, 2022, compared to $2.788 billion for the nine months ended December 25, 2021, which included net unfavorable foreign currency effects of $201 million.

Gross profit as a percentage of total revenue was 66.7% for the nine months ended December 31, 2022, compared to 67.0% for the nine months ended December 25, 2021.

The decrease in gross profit margin was primarily attributable to increased supply chain costs and unfavorable channel mix for the nine months ended December 31, 2022, as compared to the nine months ended December 25, 2021.

• Versace revenues decreased $16 million, or 5.8%, to $259 million for the three months ended July 1, 2023, compared to $275 million for the three months ended July 2, 2022 primarily attributable to lower revenues in the Americas, partially offset by increased revenues in EMEA and Greater China.

The foreign currency effect on revenue was minimal for the three months ended July 1, 2023.

• Jimmy Choo revenues increased $11 million, or 6.4%, to $183 million for the three months ended July 1, 2023, compared to $172 million for the three months ended July 2, 2022, which included unfavorable foreign currency

effects of $1 million.

On a constant currency basis, revenue increased $12 million, or 7.0%, primarily attributable to increased revenue in EMEA and Greater China, partially offset by lower revenues in the Americas.

• Michael Kors revenue decreased $126 million, or 13.8%, to $787 million for the three months ended July 1, 2023, compared to $913 million for the three months ended July 2, 2022, which included unfavorable foreign currency effects of $4 million.

On a constant currency basis, revenue decreased $122 million, or 13.4%, primarily due to lower revenues in the Americas and EMEA, partially offset by increased revenues in Greater China.

Gross profit decreased $89 million, or 9.9%, to $812 million for the three months ended July 1, 2023, compared to $901 million for the three months ended July 2, 2022.

Gross profit as a percentage of total revenue was 66.1% and 66.3% for the three months ended July 1, 2023 and July 2, 2022, respectively.

Our gross profit margin decreased primarily related to a return to more normalized promotional levels supported by an improved inventory position versus the prior year offset by lower supply chain costs for the three months ended July 1, 2023, as compared to the three months ended July 2, 2022.

Total Operating Expenses

Total operating expenses increased $134 million, or 6.7%, to $2.138 billion for the nine months ended December 31, 2022, compared to $2.004 billion for the nine months ended December 25, 2021.

Total operating expenses increased $62 million, or 9.3%, to $732 million for the three months ended July 1, 2023, compared to $670 million for the three months ended July 2, 2022.

Our operating expenses included a net favorable foreign currency impact of approximately $3 million.

Total operating expenses increased to 49.9% as a percentage of total revenue for the nine months ended December 31, 2022, compared to 48.1% for the nine months ended December 25, 2021.

Total operating expenses increased to 59.6% as a percentage of total revenue for the three months ended July 1, 2023, compared to 49.3% for the three months ended July 2, 2022.

The components that comprise total operating expenses are explained below.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $184 million, or 10.2%, to $1.984 billion for the nine months ended December 31, 2022, compared to $1.800 billion for the nine months ended December 25, 2021, primarily due to increased marketing and unallocated corporate expenses for the nine months ended December 31, 2022.

Selling, general and administrative expenses as a percentage of total revenue increased to 46.3% for the nine months ended December 31, 2022, compared to 43.2% for the nine months ended December 25, 2021, primarily due to increased marketing investments and unallocated corporate expenses as a percentage of revenue for the nine months ended December 31, 2022, as compared to the nine months ended December 25, 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 $48 million, or 39.0%, to $171 million for the nine months ended December 31, 2022 as compared to $123 million for the nine months ended December 25, 2021, 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 $15 million, or 10.3%, to $131 million for the nine months ended December 31, 2022, compared to $146 million for the nine months ended December 25, 2021.

Depreciation and amortization decreased to 3.1% as a percentage of total revenue for the nine months ended December 31, 2022, compared to 3.5% for the nine months ended December 25, 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.

Impairment of Assets

For the nine months ended December 31, 2022 and December 25, 2021, we recognized asset impairment charges of $12 million and $33 million, respectively, which are 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

We recognized restructuring and other charges of $11 million and $25 million for the nine months ended December 31, 2022 and December 25, 2021, respectively.

These charges are primarily related to equity awards associated with the acquisition of Versace.

Selling, general and administrative expenses increased $67 million, or 10.8%, to $689 million for the three months ended July 1, 2023, compared to $622 million for the three months ended July 2, 2022.

As a percentage of total revenue, selling, general and administrative expenses increased to 56.1% for the three months ended July 1, 2023, compared to 45.7% for the three months ended July 2, 2022, primarily due to increased marketing and unallocated corporate expenses and deleveraging of operating expenses on lower revenue for the three months ended July 1, 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 $11 million, or 18.3%, to $71 million for the three months ended July 1, 2023 as compared to $60 million for the three months ended July 2, 2022, primarily due to an increase in professional fees and information technology costs related to the ongoing Capri transformation projects and ERP system implementation.

Restructuring and Other (Income) Expense

We recognized restructuring and other (income) expense of $(2) million and $3 million for the three months ended July 1, 2023 and July 2, 2022, respectively.

The income for the three months ended July 1, 2023 is primarily related to a gain on the sale of a long-lived corporate asset, partially offset by acquisition related Versace equity awards and severance expenses.

The expense for the three months ended July 2, 2022 was primarily related to equity awards associated with the acquisition of Versace.

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

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

Restructuring and other (income) expense is 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 decreased $65 million, to $719 million for the nine months ended December 31, 2022, compared to $784 million for the nine months ended December 25, 2021.

Income from operations as a percentage of total revenue decreased to 16.8% for the nine months ended December 31, 2022, compared to 18.8% for the nine months ended December 25, 2021.

As a result of the foregoing, income from operations decreased $151 million, to $80 million for three months ended July 1, 2023, compared to $231 million for the three months ended July 2, 2022.

Income from operations as a percentage of total revenue decreased to 6.5% for the three months ended July 1, 2023, compared to 17.0% for the three months ended July 2, 2022.

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

Three Months Ended

(in millions) July 1,

2022 $ Change % Change

Income from operations:

Versace $ 3 $ 52 $ (49) (94.2) %

Jimmy Choo 16 19 (3) (15.8) %

Michael Kors 130 222 (92) (41.4) %

Total segment income from operations $ 149 $ 293 $ (144) (49.1) %

Operating Margin:

Versace 1.2 % 18.9 %

Jimmy Choo 8.7 % 11.0 %

Michael Kors 16.5 % 24.3 %

• Versace recorded income from operations of $3 million for the three months ended July 1, 2023, compared to $52 million for the three months ended July 2, 2022.

Operating margin decreased from 18.9% for the three months ended July 2, 2022, to 1.2% for the three months ended July 1, 2023, primarily due to increased marketing investments, particularly related to the timing of the fall fashion show which occurred in the first quarter of this fiscal year, and deleveraging of operating expenses on lower revenues.

• Jimmy Choo recorded income from operations of $16 million for the three months ended July 1, 2023, compared to $19 million for the three months ended July 2, 2022.

Operating margin decreased from 11.0% for the three months ended July 2, 2022 to 8.7% for the three months ended July 1, 2023, primarily due to higher employee costs and increased marketing investments.

• Michael Kors recorded income from operations of $130 million for the three months ended July 1, 2023, compared to $222 million for the three months ended July 2, 2022.

Operating margin decreased from 24.3% for the three months ended July 2, 2022, to 16.5% for the three months ended July 1, 2023, primarily due to increased marketing investments and deleveraging of operating expenses on lower revenues.

Interest Expense (Income), net

For the nine months ended December 31, 2022, we recognized $13 million of interest expense compared to $11 million of interest income for the nine months ended December 25, 2021.

The $24 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 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency (Gain) Loss

For the nine months ended December 31, 2022, we recognized a net foreign currency gain of $10 million, primarily attributable to a gain related to an undesignated forward foreign currency exchange contract partially offset by losses attributable to intercompany transactions among our subsidiaries.

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

For the three months ended July 1, 2023, we recognized $8 million of interest expense compared to $4 million of interest income for the three months ended July 2, 2022.

The $12 million increase in interest expense (income), net, is primarily due to higher effective interest rates and higher average borrowings on our outstanding debt, partially offset by higher interest income earned on our cash and cash equivalents (see Note 9 and Note 12 to the accompanying consolidated financial statements for additional information).

Foreign Currency Loss

For the three months ended July 1, 2023 and July 2, 2022, we recognized a net foreign currency loss of $21 million and $4 million, respectively, primarily attributable to the remeasurement of intercompany loans with certain of our subsidiaries.

Provision for Income Taxes

For the nine months ended December 31, 2022, we recognized $66 million of income tax expense compared to $54 million for the nine months ended December 25, 2021.

Our effective tax rate was 9.2% and 6.8% for the nine months ended December 31, 2022 and December 25, 2021, respectively.

In the current year, our effective tax rate benefited from the release of a valuation allowance in the United Kingdom.

In the prior year, our effective tax rate included a favorable impact from a net benefit recognized as a result of newly enacted tax legislation in Italy and a net operating loss carryback claim made in the United States as a result of COVID-19 related losses.

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

The provision for income taxes was $2 million for the three months ended July 1, 2023, compared to $28 million for the three months ended July 2, 2022.

Our effective tax rates were 4.0% and 12.1% for the three months ended July 1, 2023 and July 2, 2022, respectively.

In the current year, the decrease in our effective tax rate was primarily related to the release of a valuation allowance and a decrease in uncertain tax positions due to the settlement of an outstanding audit.

See Note 15 to the accompanying consolidated financial statements for additional information regarding the effective tax rate for the first quarter of Fiscal 2024.

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

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Net Income Attributable to Capri

As a result of the foregoing, our net income decreased $91 million to $650 million for the nine months ended December 31, 2022, compared to $741 million for the nine months ended December 25, 2021.

Segment Information

Nine Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

Reported Constant

Revenues $ 832 $ 773 $ 59 7.6 % 22.9 %

Income from operations $ 138 $ 135 $ 3 2.2 %

Operating margin 16.6 % 17.5 %

Versace revenues increased $59 million, or 7.6%, to $832 million for the nine months ended December 31, 2022, compared to $773 million for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $118 million.

On a constant currency basis, revenue increased $177 million, or 22.9%, primarily attributable to increased retail revenue and 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 nine months ended December 31, 2022, Versace recorded income from operations of $138 million, compared to $135 million for the nine months ended December 25, 2021.

Operating margin decreased from 17.5% for the nine months ended December 25, 2021, to 16.6% for the nine months ended December 31, 2022, primarily due to unfavorable channel mix offset by higher average unit price.

Nine Months Ended % Change

(dollars in millions) December 31,

2022 December 25,

2021 $ Change As

Reported Constant

Revenues $ 482 $ 457 $ 25 5.5 % 15.1 %

Income from operations $ 45 $ 28 $ 17 60.7 %

Operating margin 9.3 % 6.1 %

Jimmy Choo revenues increased $25 million, or 5.5%, to $482 million for the nine months ended December 31, 2022, compared to $457 million for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $44 million.

On a constant currency basis, revenue increased $69 million, or 15.1%, primarily attributable to increased retail revenue and wholesale shipments 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 31, 2022, Jimmy Choo recorded income from operations of $45 million, compared to $28 million for the nine months ended December 25, 2021.

Operating margin increased from 6.1% for the nine months ended December 25, 2021, to 9.3% for the nine months ended December 31, 2022, primarily due to higher average unit price and leveraging of operating expenses on higher revenue.

Nine Months Ended % Change

(dollars in millions)

2022 December 25,

2021 $ Change As

Reported Constant

Revenues $ 2,970 $ 2,932 $ 38 1.3 % 5.6 %

Income from operations $ 721 $ 795 $ (74) (9.3) %

Operating margin 24.3 % 27.1 %

Michael Kors revenues increased $38 million, or 1.3%, to $2.970 billion for the nine months ended December 31, 2022, compared to $2.932 billion for the nine months ended December 25, 2021, which included unfavorable foreign currency effects of $126 million.

On a constant currency basis, revenue increased $164 million, or 5.6%, 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 31, 2022, Michael Kors recorded income from operations of $721 million, compared to $795 million for the nine months ended December 25, 2021.

Operating margin decreased from 27.1% for the nine months ended December 25, 2021, to 24.3% for the nine months ended December 31, 2022, primarily due to increased supply chain costs, unfavorable regional mix and increased marketing investments.

As a result of the foregoing, our net income decreased $153 million to $48 million for the three months ended July 1, 2023, compared to $201 million for the three months ended July 2, 2022.

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 $168 million on capital expenditures during the nine months ended December 31, 2022.

We spent $50 million on capital expenditures during the three months ended July 1, 2023.

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.

Through Fiscal 2026, 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 related to these initiatives.

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

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Long-term debt $ 1,924 $ 1,822

Nine Months Ended

2022 December 25,

Three Months Ended

Cash Flows Provided By (Used In):

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Effect of exchange rate changes $ (3) $ (65)

Net increase in cash and cash equivalents $ 112 $ 30

Net (decrease) increase in cash and cash equivalents $ (16) $ 52

Cash Provided by Operating Activities

Net cash provided by operating activities decreased $97 million to $616 million during the nine months ended December 31, 2022, as compared to $713 million for the nine months ended December 25, 2021, as a result of a decrease in our net income after non-cash adjustments partially offset by deceleration of inventory receipts compared to prior year.

Cash Provided by (Used in) Investing Activities

Net cash provided by investing activities was $241 million during the nine months ended December 31, 2022, as compared to net cash used in investing activities of $26 million during the nine months ended December 25, 2021.

The increase in net cash provided by investing activities were primarily attributable to the higher settlement of net investment hedges of $350 million during the nine months ended December 31, 2022 partially offset by higher capital expenditures of $83 million compared to prior year.

Net cash provided by operating activities decreased $97 million to $40 million during the three months ended July 1, 2023, as compared to $137 million for the three months ended July 2, 2022, as a result of a decrease in our net income after non-cash adjustments and decreases in working capital requirements due to the stabilization of inventory levels compared to prior year.

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $50 million during the three months ended July 1, 2023, as compared to net cash provided by investing activities of $30 million during the three months ended July 2, 2022.

The increase in net cash used

in investing activities were primarily attributable to the settlement of net investment hedges of $66 million during the three months ended July 2, 2022 partially offset by higher capital expenditures of $14 million compared to prior year.

Cash Used in Financing Activities

Net cash used in financing activities was $651 million during the nine months ended December 31, 2022, as compared to $663 million during the nine months ended December 25, 2021.

The decrease of cash used in financing activities of $12 million was primarily attributable to an increase in net debt borrowing of $657 million, partially offset by a $604 million increase in cash payments to repurchase our ordinary shares compared to prior year.

Net cash used in financing activities was $3 million during the three months ended July 1, 2023, as compared to $50 million during the three months ended July 2, 2022.

The decrease of cash used in financing activities of $47 million was primarily attributable to a decrease in net debt borrowings of $158 million, partially offset by a $206 million decrease 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 31, 2022 and April 2, 2022 (in millions):

The following table presents a summary of our borrowing capacity and amounts outstanding as of July 1, 2023 and April 1, 2023 (in millions):

2023 April 1,

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Remaining availability $ 524 $ 623

2018 Term Loan ($1.6 billion)

Borrowings outstanding, net of debt issuance costs (3)

Versace Term Loan (450 Million Euro)

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Hong Kong Uncommitted Credit Facility:

Total availability (100 million and 80 million Hong Kong Dollars) (6)

Total availability (70 million Hong Kong Dollars) (5)

Borrowings outstanding — —

Remaining availability (100 million and 80 million Hong Kong Dollars) $ 13 $ 10

Remaining availability (70 million Hong Kong Dollars) $ 9 $ 9

China Uncommitted Credit Facility:

Total availability (75 million and 45 million Chinese Yuan) (6)

Total availability (75 million Chinese Yuan) (5)

Borrowings outstanding — —

Total and remaining availability (75 million and 45 million Chinese Yuan) $ 11 $ 7

Total and remaining availability (75 million Chinese Yuan) $ 10 $ 11

Japan Credit Facility:

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Versace Uncommitted Credit Facilities:

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

Total availability (40 million Euro) (5)

Borrowings outstanding — —

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

Remaining availability (40 million Euro) $ 44 $ 43

Total borrowings outstanding (1)

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(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 December 31, 2022 and April 2, 2022, we were in compliance with all covenants related to our agreements then in effect governing our debt.

As of July 1, 2023 and April 1, 2023, 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 31, 2022 and April 2, 2022, all amounts are recorded as long-term debt in our consolidated balance sheets.

(3) As of December 31, 2022, 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.

(4) On December 5, 2022, Gianni Versace S.r.l., our wholly owned subsidiary, entered into a credit facility, which provides a senior unsecured term loan in an aggregate principal amount of €450 million (approximately $482 million).

As of December 31, 2022 all amounts are recorded as long-term debt in our consolidated balance sheets.

(5) The balance as of December 31, 2022 consists of $18 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $11 million related to the sale of certain Versace tax receivables, with $1 million and $10 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $2 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.

(6) The balance as of December 31, 2022 and April 2, 2022 represents the total availability of the credit facility, which excludes bank guarantees.

(2) As of July 1, 2023 and April 1, 2023, 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 provides a senior unsecured term loan in an aggregate principal amount of €450 million.

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

(4) The balance as of July 1, 2023 consists of $12 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets, $11 million related to the sale of certain Versace tax receivables, with $1 million and $10 million, respectively, recorded within short-term debt and long-term debt in our consolidated balance sheets and $2 million of other loans recorded as long-term debt in our consolidated balance sheets.

The balance as of April 1, 2023 consists of $4 million related to our supplier finance program recorded within short-term debt in our consolidated balance sheets, $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.

(5) The balance as of July 1, 2023 and April 1, 2023 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 31, 2022, there were 17 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of July 1, 2023, 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 31, 2022 and December 25, 2021 (dollars in millions):

Nine Months Ended

2022 December 25,

The following table presents our treasury share repurchases during the three months ended July 1, 2023 and July 2, 2022 (dollars in millions):

Three Months Ended

Cost of shares repurchased under share repurchase program $ 100 $ 300

Fair value of shares withheld to cover tax obligations for vested restricted share awards

Total cost of ordinary shares repurchased $ 964 $ 360

Total cost of treasury shares repurchased $ 106 $ 312

Shares repurchased under share repurchase program 2,636,564 6,120,174

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2,800,941 6,385,485

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 Company announced that its Board of Directors had terminated the Fiscal 2022 Plan, with $500 million of availability remaining, and authorized a new share repurchase program (the “Fiscal 2023 Plan”) pursuant to

which the Company may, from time to time, repurchase up to $1.0 billion of its outstanding ordinary shares within a period of 2 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.

On June 1, 2022, the Company announced its Board of Directors 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 a period of two years from the effective date of the program.

On November 9, 2022, the Company announced its Board of Directors approved a new share repurchase program (the “Existing Share Repurchase Plan”) of up to $1.0 billion of our 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.

As of July 1, 2023, the remaining availability under the Existing Share Repurchase Plan was $300 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.

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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 31, 2022, including $20 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of December 31, 2022, bank guarantees of approximately $35 million were supported by our various credit facilities.

Our off-balance sheet commitments relating to our outstanding letters of credit were $33 million at July 1, 2023, including $30 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of July 1, 2023, bank guarantees of approximately $38 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