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Item 7. Management’s Discussion and Analysis

2024-05-29 compared with 2023-05-31 · 231 added, 215 removed, 341 unchanged (57% of the section changed)

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

Agreement and Plan of Merger

On August 10, 2023, Capri entered into an Agreement and Plan of Merger with Tapestry, Inc., a Maryland corporation, and Sunrise Merger Sub, Inc., a British Virgin Islands business company limited by shares and a direct wholly owned subsidiary of Tapestry.

The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Tapestry will acquire Capri in an all-cash transaction by means of a merger of Merger Sub with and into Capri, with Capri surviving the Merger as a wholly owned subsidiary of Tapestry.

For additional information related to the Merger Agreement, please refer to Capri’s Definitive Proxy Statement on Schedule 14A filed with the U.S.

Securities and Exchange Commission (the “SEC”) on September 20, 2023, as well as the supplemental disclosures contained in Capri’s Current Report on Form 8-K filed with the SEC on October 17, 2023.

In connection with Tapestry’s pending acquisition of Capri, on April 22, 2024, the U.S.

FTC filed a lawsuit in the United States District Court for the Southern District of New York against Tapestry and the Company seeking to block the Merger, claiming that the Merger would violate Section 7 of the Clayton Act and that the Merger Agreement and the Merger constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined.

The Company believes the FTC’s claims are without merit, and the Company, together with Tapestry, intend to vigorously defend the lawsuit.

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

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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.

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 ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings.

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 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.

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

In addition, certain categories, including fragrance and eyewear, are produced under licensing agreements.

Jimmy Choo’s design team is led by Sandra Choi, who has been the Creative Director for the brand since its inception in 1996.

Jimmy Choo products are unique, instinctively seductive and chic.

The brand offers classic and timeless luxury products, as well as innovative products that are intended to set and lead fashion trends.

The brand offers classic and timeless luxury products, alongside innovative collections that are intended to set and lead fashion trends.

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 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.

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, ready-to-wear, and footwear 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.

Michael Kors features distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude.

Michael Kors features distinctive designs, materials and craftsmanship that combines stylish elegance and a sporty attitude.

Michael Kors offers three primary collections:

the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible luxury line and the Michael Kors Mens line.

the Michael Kors Collection line, the MICHAEL Michael Kors line and the Michael Kors Mens line.

The Michael Kors Collection establishes the aesthetic authority of the entire brand and is carried by select retail stores, our e-commerce sites, as well as in the finest luxury department stores in the world.

MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and ready-to-wear, and addresses the significant demand opportunity in accessible luxury goods.

MICHAEL Michael

Kors has a strong focus on accessories, in addition to offering ready-to-wear and footwear.

We have also been developing our men’s business in recognition of the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s market.

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Global economic conditions and the related impact on levels of consumer spending worldwide impacted our business in 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, particularly in the second half of Fiscal 2023, which is expected to continue in the near term.

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 created a challenging retail environment, 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 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.

The COVID-19 pandemic has resulted in varying degrees of business disruption for our industry, including us, since it began at the end of Fiscal 2020.

Our 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 .

Government restrictions have since been lifted in the Greater China region.

The COVID-19 pandemic did not have a significant impact during Fiscal 2024.

We continue to monitor the latest developments regarding the COVID-19 pandemic and potential impacts on our business, operating results and outlook.

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

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

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.

In 2023, the global personal luxury goods market grew 8% and is predicted to increase at a 6-7% compound annual growth rate between 2023 and 2030.

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

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

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

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

our business.

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

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

Implementing and updating information technology systems.

During Fiscal 2024, we began implementing a new state of the art e-commerce platform across our brands which is expected to continue through Fiscal 2025.

While the new platform is designed to improve the user experience and enhance consumer engagement, the transition created unanticipated challenges which have negatively impacted our results of operations.

The continued implementation of this platform may also negatively impact our future results of operations.

See Item 1A — “Risk Factors” — “A material delay or disruption in our information technology systems or e-commerce websites or our failure or inability to upgrade our information technology systems precisely and efficiently could have a material adverse effect on our business, results of operations and financial condition” for additional discussion.

Segment Information

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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.

In addition, certain other costs are not allocated to segments, including Merger related costs, impairment

charges, the impact of the war in Ukraine, restructuring and other expenses 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 (loss) from operations by segment for Fiscal 2023, Fiscal 2022 and Fiscal 2021 (in millions):

The following table presents our total revenue and (loss) income from operations by segment for Fiscal 2024, Fiscal 2023 and Fiscal 2022 (in millions):

Fiscal Years Ended

2024 April 1,

2022 March 27,

2023 April 2,

Total revenue:

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Total revenue $ 5,170 $ 5,619 $ 5,654

Income (loss) from operations:

Income from operations:

Versace $ 25 $ 152 $ 185

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(575) (142) (73)

Merger related costs (20) — —

COVID-19 related charges (2)

Impact of war in Ukraine (3)

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

Total income from operations $ 679 $ 903 $ 19

Restructuring and other expense (4)

(33) (16) (42)

Total (loss) income from operations $ (241) $ 679 $ 903

(1) Impairment of assets during Fiscal 2024 includes $283 million, $267 million and $25 million of impairment charges related to the Versace, Jimmy Choo and Michael Kors reportable segments, respectively.

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 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 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).

(3) These charges primarily relate to incremental credit losses and inventory reserves which are a direct impact of the war in Ukraine.

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

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

(4) See Note 11 for details on the Company's restructuring program.

The following table presents our global network of retail stores:

2024 April 1,

2022 March 27,

2023 April 2,

Number of full price retail stores (including concessions):

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Total number of retail stores 1,239 1,272 1,271

Total number of wholesale doors:

Versace 744 803 868

Jimmy Choo 527 446 450

Michael Kors 2,843 2,742 2,852

4,114 3,991 4,170

The following table presents our retail stores by geographic location:

April 1, 2023 April 2, 2022

March 30, 2024 April 1, 2023

Versace Jimmy Choo Michael Kors Versace Jimmy Choo Michael Kors

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2024 April 1,

2022 March 27,

2023 April 2,

Total revenue $ 5,170 $ 5,619 $ 5,654

Gross profit as a percent of total revenue 64.6 % 66.3 % 66.2 %

Income from operations $ 679 $ 903 $ 19

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

(Loss) income from operations $ (241) $ 679 $ 903

(Loss) income from operations as a percent of total revenue (4.7) % 12.1 % 16.0 %

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, $22 million and $20 million at April 1, 2023, April 2, 2022 and March 27, 2021, respectively.

The amounts reserved for retail sales returns were $18 million, $22 million and $22 million at March 30, 2024, April 1, 2023 and April 2, 2022, 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 $73 million, $70 million and $78 million at April 1, 2023, April 2, 2022 and March 27, 2021, respectively.

Total sales reserves for wholesale were $61 million, $73 million and $70 million at March 30, 2024, April 1, 2023 and April 2, 2022, 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 recorded on our consolidated balance sheets as of April 1, 2023 and April 2, 2022 were $47 million and $31 million, respectively.

The combined total of raw materials and work in process recorded on our consolidated balance sheets as of March 30, 2024 and April 1, 2023 were $45 million and $47 million, respectively.

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

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If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference.

These valuations are affected by certain estimates, including future revenue growth rates, future operating expense growth rates, gross margins and discount rates.

These valuations are affected by certain estimates, including future revenue growth rates, future operating expense growth rates, gross margins, discount rates and market multiples.

Future events could cause us to conclude that impairment indicators exist and goodwill may be impaired.

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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.

Based on the results of these assessments, we determined there was no impairment for the Jimmy Choo Licensing reporting unit goodwill as the fair value was significantly higher than the related carrying value.

Further, we concluded that the fair value of the Jimmy Choo Retail and Wholesale reporting unit goodwill and Retail and Wholesale brand indefinite-lived intangible assets did not exceed their related carrying amounts and we recorded impairment.

These impairment charges were primarily related to a decline in revenue expectations driven by a softening demand globally for fashion luxury goods.

Accordingly, we recorded goodwill impairment charges of $192 million related to the Jimmy Choo Retail and Wholesale reporting units.

The Jimmy Choo Retail reporting unit’s goodwill balance was fully impaired and the Jimmy Choo Wholesale reporting unit had a remaining goodwill balance of $81 million.

We also recorded impairment charges of $70 million related to the Jimmy Choo Retail and Wholesale brand intangible assets that have remaining balances of $152 million and $63 million, respectively.

The impairment charges were recorded within impairment of assets on our consolidated statement of operations and comprehensive (loss) income for the fiscal year ended March 30, 2024.

Further, based on the results of these assessments, we determined that there was no impairment for the Versace Retail and Licensing reporting units as the fair values of these reporting units significantly exceeded the related carrying amounts.

There was also no impairment for the Versace Wholesale reporting unit as its fair value was approximately 3% higher than its carrying value which has a goodwill balance of $284 million.

Additionally, the fair value of the Versace Retail and Wholesale brand indefinite-lived intangible assets did not exceed their related carrying amounts.

These impairment charges were primarily related to a slowdown in revenue driven by softening demand globally for fashion luxury goods.

During Fiscal 2024, we recorded $227 million related to the Versace Retail and Wholesale brand intangible assets that have remaining balances of $507 million and $162 million, respectively.

The impairment charges were recorded within impairment of assets on our consolidated statements of operations and comprehensive (loss) income for the fiscal year ended March 30, 2024.

In Fiscal 2023, we 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.

The impairment charges were recorded within impairment of assets on our consolidated statements of operations and comprehensive (loss) income 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.

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 9 to the accompanying financial statements for information relating to the annual impairment analysis performed during the fourth quarters of Fiscal 2024, Fiscal 2023 and Fiscal 2022.

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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 loss (gain) 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 in our consolidated statements of operations and comprehensive (loss) income.

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 different currencies.

We also use 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 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.

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

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

We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations.

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 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.

During Fiscal 2021, the Company entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $4 billion to hedge its net investment in Euro-denominated subsidiaries and $194 million to hedge its net investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the United States dollar and these currencies.

During the first quarter of Fiscal 2022, we modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $2.875 billion to hedge its net investment in Euro denominated subsidiaries.

Due to an other-than-insignificant financing element for certain of the first quarter modifications, net interest cash inflows of $31 million during Fiscal 2022 related to these contracts are classified as financing activities in our consolidated statements of cash flows.

During the third and fourth quarter of Fiscal 2022, we modified multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $1.5 billion and $2.475 billion, respectively.

The modification of these hedges resulted in the receipt of $59 million and $130 million in cash during the third and fourth quarter of Fiscal 2022, respectively.

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

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.

During the first quarter of Fiscal 2024, we entered into multiple fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $2.5 billion to hedge our net investment in Swiss Franc (“CHF”) denominated subsidiaries.

During the third quarter of Fiscal 2024, we modified these fixed-to-fixed cross-currency swap agreements with aggregate notional amounts of $2.5 billion to utilize additional CHF capacity and further hedge our investment in CHF denominated subsidiaries.

Under the terms of these contracts, we will exchange semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0%.

The increase in interest received from the CHF notional amounts will be offset by interest expense related to the financing component of this modification.

These contracts have maturity dates between

September 2024 and June 2028 and are designated as net investment hedges.

As of March 30, 2024, we had $2.5 billion of hedges outstanding related to our net investment in CHF denominated subsidiaries.

During the first quarter of Fiscal 2024, we entered into multiple float-to-float cross-currency swap agreements with aggregate notional amounts of $1 billion to hedge its net investment in Euro denominated subsidiaries.

We will exchange Euro floating rate payments based on EURIBOR for the United States dollar floating rate amounts based on SOFR CME Term over the life of the agreement.

The fixed rate component of semi-annual Euro payments range from 1.149% to 1.215%.

These contracts have maturity dates between May 2028 and August 2030 and are designated as net investment hedges.

As of March 30, 2024, we had $1 billion float-to-float cross-currency hedges outstanding related to its net investment in Euro denominated subsidiaries.

During the first quarter of Fiscal 2024, we entered into multiple fixed-to-fixed cross-currency swap agreements with an aggregate notional amount of $350 million to hedge its net investment in Euro denominated subsidiaries.

Under the terms of these contracts, we will exchange the semi-annual fixed rate payments on United States Dollar notional amounts for fixed rate payments of 0.0% in Euro.

These contracts have maturity dates between January 2027 and April 2027 and have been designated as net investment hedges.

As of March 30, 2024, we had $350 million of fixed-to-fixed cross-currency hedges outstanding related to its net investment in Euro denominated subsidiaries.

As of April 1, 2023, we had €1 billion of hedges outstanding to hedge its net investment in British Pound (“GBP”) denominated subsidiaries (the “GBP/EUR Net Investment Hedges”).

During the first quarter of Fiscal 2024, we entered into an additional fixed-to-fixed cross-currency swap agreement with an aggregate notional amount of €150 million GBP/EUR Net Investment Hedges.

During the fourth quarter of Fiscal 2024, we terminated all of its GBP/EUR Net Investment Hedges of €1.150 billion ($1.241 billion).

We received $24 million in cash during the fourth quarter of Fiscal 2024 as a result of the termination of these swaps .

As of April 1, 2023, we had $294 million of hedges outstanding to hedge its net investment in Japanese Yen denominated subsidiaries (the “JPY Hedges”).

During the fourth quarter of Fiscal 2024, we terminated all of its JPY Hedges of $294 million.

The termination of these swaps resulted in us receiving $6 million in cash during the fourth quarter of Fiscal 2024.

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 we consolidated statements of operations and comprehensive (loss) income.

Accordingly, we recorded interest income of $95 million, $38 million and $63 million, respectively, during Fiscal 2024, Fiscal 2023 and Fiscal 2022.

The net gain or loss on net investment hedges are reported within CTA as a component of accumulated other comprehensive income on our consolidated balance sheets.

Upon discontinuation of the hedge, such amounts remain in CTA until the related net investment is sold or liquidated.

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.

We are exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans which will impact earnings on a consolidated basis.

To manage the foreign currency exchange rate risk related to these balances, we had previously entered into fair value cross-currency swap agreements to hedge its exposure in GBP denominated subsidiaries (the “GBP Fair Value Hedge”) on Euro denominated intercompany loans.

As of April 1, 2023, we had €1 billion of GBP Fair Value Hedge on Euro denominated intercompany loans.

During the fourth quarter of Fiscal 2024, we terminated the GBP Fair Value Hedge of €1 billion ($1.093 billion).

The terminations of these swaps resulted in us receiving $25 million in cash during the fourth quarter of Fiscal 2024.

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 our consolidated balance sheets, with the difference resulting from the changes in the spot rate recognized in foreign currency loss on our consolidated statements of operations and comprehensive (loss) income, which will offset the earnings impact of the underlying transaction being hedged.

If the fair value hedge is terminated and the underlying intercompany loans are fully paid back, the accumulated other comprehensive income (“AOCI”) remaining from the hedge at the time of termination will be reclassified to foreign currency loss on our consolidated statements of operations and comprehensive (loss) income.

Upon the settlement of the Euro denominated intercompany loans during the fourth quarter of Fiscal 2024, we released the AOCI amount related to GBP Fair value Hedge and recognized a $14 million

foreign currency loss on our consolidated statements of operations and comprehensive (loss) income.

We recorded a foreign currency gain of $28 million and $4 million during Fiscal 2024 and Fiscal 2023, respectively.

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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A discussion regarding our results of operations for Fiscal 2024 compared to Fiscal 2023 is presented below.

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 .

A discussion regarding our results of operations for Fiscal 2023 compared to Fiscal 2022 can be found under Item 7 in our Annual Report on Form 10-K for the year ended April 1, 2023, filed with the SEC on May 31, 2023, which is available on the SEC’s website at www.sec.gov and our investor website at www.capriholdings.com .

Comparison of Fiscal 2024 with Fiscal 2023

The following table details the results of our operations for Fiscal 2024 and Fiscal 2023 and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Fiscal Years Ended $ Change % Change % of Total

Fiscal Years Ended $ Change % Change % of Total Revenue for Fiscal Year Ended

2024 April 1,

2023 March 30,

2024 April 1,

Statements of Operations Data:

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Depreciation and amortization 188 179 9 5.0 % 3.6 % 3.2 %

Impairment of assets 142 73 69 94.5 % 2.5 % 1.3 %

Restructuring and other charges 16 42 (26) (61.9) % 0.3 % 0.7 %

Impairment of assets 575 142 433 NM 11.1 % 2.5 %

Restructuring and other expense 33 16 17 NM 0.6 % 0.3 %

Total operating expenses 3,580 3,045 535 17.6 % 69.2 % 54.2 %

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

(Loss) income from operations (241) 679 (920) NM (4.7) % 12.1 %

Other income, net (1) (3) 2 66.7 % — % (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 619 823 (204) (24.8) %

Interest expense, net 6 24 (18) (75.0) % 0.1 % 0.4 %

Foreign currency loss 37 10 27 NM 0.7 % 0.2 %

(Loss) income before (benefit) provision for income taxes (283) 648 (931) NM (5.5) % 11.5 %

(Benefit) provision for income taxes (54) 29 (83) NM (1.0) % 0.5 %

Net (loss) income (229) 619 (848) NM

Net income attributable to noncontrolling interests — 3 (3) NM

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

Net (loss) income attributable to Capri $ (229) $ 616 $ (845) NM

NM Not meaningful

Total Revenue

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, partially offset by unfavorable regional sales mix.

Total revenue decreased $449 million, or 8.0%, to $5.170 billion for Fiscal 2024, compared to $5.619 billion for Fiscal 2023, which included net favorable foreign currency effects of $24 million as a result of the weakening of the United States dollar against the Euro partially offset by the strengthening of the United States dollar compared to the Chinese Renminbi and Japanese Yen in Fiscal 2024, as compared to Fiscal 2023.

On a constant currency basis, our total revenue decreased $473 million, or 8.4%.

The decrease is primarily attributable to lower revenues in the Americas for each of our brands.

Fiscal Years Ended % Change

(in millions) March 30, 2024 April 1, 2023 $ Change As

Reported Constant

Versace $ 1,030 $ 1,106 $ (76) (6.9) % (7.9) %

Jimmy Choo 618 633 (15) (2.4) % (3.0) %

Michael Kors 3,522 3,880 (358) (9.2) % (9.5) %

Total revenue $ 5,170 $ 5,619 $ (449) (8.0) % (8.4) %

• Versace revenues decreased $76 million, or 6.9%, to $1.030 billion during Fiscal 2024, compared to $1.106 billion for Fiscal 2023, which included favorable foreign currency effects of $11 million.

On a constant currency basis, revenue decreased $87 million, or 7.9%, primarily attributable to lower revenues in the Americas and EMEA, partially offset by higher revenues in Asia.

• Jimmy Choo revenues decreased $15 million, or 2.4%, to $618 million during Fiscal 2024, compared to $633 million for Fiscal 2023, which included favorable foreign currency effects of $4 million.

On a constant currency basis, revenue decreased $19 million, or 3.0%, primarily attributable to lower revenues in the Americas, partially offset by increased revenue in EMEA.

• Michael Kors revenues decreased $358 million, or 9.2%, to $3.522 billion during Fiscal 2024, compared to $3.880 billion for Fiscal 2023, which included favorable foreign currency effects of $9 million.

On a constant currency basis, revenue decreased $367 million, or 9.5%, primarily due to lower revenues in the Americas.

Gross profit decreased $385 million, or 10.3%, to $3.339 billion during Fiscal 2024, compared to $3.724 billion for Fiscal 2023, which included net favorable foreign currency effects of $35 million.

Gross profit as a percentage of total revenue decreased 170 basis points to 64.6% during Fiscal 2024, compared to 66.3% during Fiscal 2023.

The decrease in gross profit margin was primarily attributable to lower full price sell-through, partially offset by lower supply chain costs.

Total Operating Expenses

Total operating expenses increased $535 million, or 17.6%, to $3.580 billion during Fiscal 2024, compared to $3.045 billion for Fiscal 2023.

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

Our operating expenses included a net unfavorable foreign currency impact of approximately $53 million.

Total operating expenses as a percentage of total revenue increased to 69.2% in Fiscal 2024, compared to 54.2% in Fiscal 2023.

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Selling, general and administrative expenses increased $76 million, or 2.8%, to $2.784 billion during Fiscal 2024, compared to $2.708 billion for Fiscal 2023.

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.

As a percentage of total revenue, selling, general and administrative expenses increased to 53.8% during Fiscal 2024, compared to 48.2% for Fiscal 2023, primarily due to increased retail store costs, marketing investments, unallocated corporate expenses along with deleveraging of operating expenses on lower revenue for Fiscal 2024.

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, increased $42 million, or 18.0%, to $275 million for Fiscal 2024, compared to $233 million for Fiscal 2023, primarily due to significant transformation costs for projects which are largely complete.

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 increased $9 million, or 5.0%, to $188 million during Fiscal 2024, compared to $179 million for Fiscal 2023.

Depreciation and amortization increased to 3.6% as a percentage of total revenue during Fiscal 2024, compared to 3.2% for Fiscal 2023.

The increase in depreciation and amortization expense was primarily attributable to higher depreciation due to information technology assets associated with Capri transformation projects which are now in service.

Impairment of Assets

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 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).

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.

Income from Operations

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.

During Fiscal 2024, we recognized asset impairment charges of $575 million, primarily related to the impairment of the Jimmy Choo Retail and Wholesale reporting units’ goodwill and Versace and Jimmy Choo brand intangible assets of $489 million, as well as the impairment of certain operating lease right-of-use assets of $77 million.

During Fiscal 2023, we recognized asset impairment charges of approximately $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 (see Note 14 to the accompanying consolidated financial statements for additional information).

Restructuring and Other Expense

During Fiscal 2024, we recognized restructuring and other expense of $33 million, primarily relating to severance costs in connection with the Global Optimization Plan and equity awards associated with the acquisition of Versace partially offset by a $10 million gain on the sale of a long-lived corporate asset (see Note 11 to the accompanying consolidated financial statements for additional information).

As part of the Global Optimization Plan, we anticipate global headcount reductions and the closure of approximately 100 of our retail stores over the next 18 months.

We expect this initiative to generate annualized cost savings of approximately $80 million to $90 million.

We also expect to record estimated one-time restructuring charges of approximately $30 million to $40 million, of which approximately $30 million to $35 million will be cash charges related to organizational efficiency initiatives, which consist primarily of severance and employee-related costs.

We anticipate that up to $5 million of the restructuring charges will be related to lease termination and other store closure costs.

During Fiscal 2023, we recognized restructuring and other expense of $16 million, primarily relating to equity awards associated with the acquisition of Versace.

(Loss) Income from Operations

As a result of the foregoing, loss from operations was $241 million during Fiscal 2024, compared to income from operations of $679 million for Fiscal 2023.

(Loss) income from operations as a percentage of total revenue was a loss of 4.7% in Fiscal 2024, compared to income of 12.1% in Fiscal 2023.

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

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).

Fiscal Years Ended

(in millions) March 30, 2024 April 1, 2023 $ Change % Change

Income from operations:

Versace $ 25 $ 152 $ (127) (83.6) %

Jimmy Choo 3 38 (35) (92.1) %

Michael Kors 634 868 (234) (27.0) %

Total income from operations $ 662 $ 1,058 $ (396) (37.4) %

Operating Margin:

Versace 2.4 % 13.7 %

Jimmy Choo 0.5 % 6.0 %

Michael Kors 18.0 % 22.4 %

• Versace recorded income from operations of $25 million for Fiscal 2024, compared to $152 million for Fiscal 2023.

Operating margin decreased from 13.7% for Fiscal 2023, to 2.4% for Fiscal 2024, primarily due to increased retail store costs, increased marketing investments, deleveraging of operating expenses on lower revenues and lower full price sell-through compared to the prior year.

• Jimmy Choo recorded income from operations of $3 million for Fiscal 2024, compared to $38 million for Fiscal 2023.

Operating margin decreased from 6.0% for Fiscal 2023, to 0.5% for Fiscal 2024, primarily due to increased retail store costs, increased marketing investments and lower full price sell-through compared to the prior year.

• Michael Kors recorded income from operations of $634 million for Fiscal 2024, compared to $868 million for Fiscal 2023.

Operating margin decreased from 22.4% for Fiscal 2023, to 18.0% for Fiscal 2024, primarily due to increased marketing investments, increased retail store costs, deleveraging of operating expenses on lower revenues and lower full price sell-through, partially offset by lower supply chain costs compared to the prior year.

Interest Expense, net

During Fiscal 2024 and Fiscal 2023, we recognized $6 million and $24 million of interest expense, net, respectively.

The $18 million decrease in interest expense, net, is primarily due to higher interest income of $57 million from our net investment hedges, partially offset by higher effective interest rates and higher average borrowings on our outstanding debt (see Note 12 and Note 15 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 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.

During Fiscal 2024, we recognized a net foreign currency loss of $37 million primarily attributable to the remeasurement of an intercompany loan associated with restructuring activities to rationalize certain legal entities within our structure and a loss related to the termination of a GBP fair value hedge.

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

(Benefit) Provision for Income Taxes

During Fiscal 2024, we recognized $54 million of an income tax benefit on a pre-tax loss of $283 million compared with $29 million of income tax expense on a pre-tax income of $648 million for Fiscal 2023.

Our effective tax rate for Fiscal 2024 compared to our effective tax rate in Fiscal 2023 is not a meaningful metric due to the pre-tax loss for Fiscal 2024 and pre-tax income for Fiscal 2023.

The decrease in income tax provision of $83 million compared to Fiscal 2023 was primarily due to the decline in our pre-tax income, partially offset by a lower benefit from global financing activities and less favorable impacts from changes in valuation allowances.

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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tax resident.

In connection with this decision, we funded our international growth strategy through intercompany debt financing arrangements between certain of our United States, United Kingdom and Hungarian subsidiaries.

In connection with this decision, we funded our international growth strategy through intercompany debt financing arrangements between certain of our United States and United Kingdom subsidiaries.

Accordingly, due to the difference in the statutory income tax rates between these jurisdictions, we realized a lower effective tax rate on consolidated pre-tax income.

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

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, 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

2023 April 2,

2022 $ Change As Reported Constant

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

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

Operating margin 13.7 % 17.0 %

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 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

2023 April 2,

2022 $ Change As Reported Constant

Revenues $ 633 $ 613 $ 20 3.3 % 11.4 %

Income from operations $ 38 $ 13 $ 25 NM

Operating margin 6.0 % 2.1 %

NM Not meaningful

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

2023 April 2,

2022 $ Change As Reported Constant

Revenues $ 3,880 $ 3,953 $ (73) (1.8) % 2.0 %

Income from operations $ 868 $ 1,005 $ (137) (13.6) %

Operating margin 22.4 % 25.4 %

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 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.

Net (Loss) Income Attributable to Capri

As a result of the foregoing, during Fiscal 2024 our net loss attributable to Capri was $229 million, compared to net income of $616 million for Fiscal 2023.

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 IT system 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 opening and renovation plans, investments in corporate and distribution facilities, continued IT system development, e-commerce and marketing initiatives.

We spent $189 million on capital expenditures during Fiscal 2024 and expect to spend approximately $135 million during Fiscal 2025.

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 2024 expenditures related to our retail operations (including e-commerce), ERP system implementation and Capri transformation programs.

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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.

During Fiscal 2024, the remaining transformation projects were paused due to the pending Merger and we will reassess this program, along with related timing, in Fiscal 2025.

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

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2024 April 1,

2022 March 27,

2023 April 2,

Cash flows provided by (used in):

3 unchanged sentences

Effect of exchange rate changes (17) (94) (24)

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

Net (decrease) increase in cash, cash equivalents and restricted cash $ (51) $ 84 $ (62)

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.

Net cash provided by operating activities was $309 million during Fiscal 2024, as compared to $771 million for Fiscal 2023.

The decrease in net cash provided by operating activities were primarily attributable to a decrease in our net income after non-cash adjustments which includes significant transformation costs for projects which are largely complete.

In addition, our net cash provided by operating activities benefited from lower inventory levels, partially offset by unfavorable decreases in accounts payable and accrued expenses.

Net 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 (Used in) Investing Activities

Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was $135 million during Fiscal 2024, as compared to net cash provided by investing activities of $183 million during Fiscal 2023.

The increase in net cash used in investing activities were primarily attributable to the lower settlement of net investment hedges of $355 million, partially offset by lower capital expenditures of $37 million compared to prior year.

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 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 $208 million during Fiscal 2024, as compared to $776 million during Fiscal 2023.

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.

The decrease in cash used by financing activities of $568 million was primarily attributable to a decrease in cash payments to repurchase our ordinary shares of $1.257 billion, offset by lower net debt borrowings of $689 million compared to prior year.

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 in 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.

Debt Facilities

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):

The following table presents a summary of our borrowing capacity and amounts outstanding as of March 30, 2024 and April 1, 2023 (in millions):

Fiscal Years Ended

9 unchanged sentences

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 (4)

Hong Kong Uncommitted Credit Facility:

Total availability (70 million and 80 million Hong Kong Dollar) (6)

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

Borrowings outstanding — —

Remaining availability (70 million and 80 million Hong Kong Dollar) $ 9 $ 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 — —

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

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

Japan Credit Facility:

2 unchanged sentences

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

Versace Uncommitted Credit Facility:

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

Versace Uncommitted Credit Facilities:

Total availability (40 million Euro) (5)

Borrowings outstanding — —

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

Remaining availability (40 million Euro) $ 43 $ 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 April 1, 2023 and April 2, 2022, we were in compliance with all covenants related to our agreements then in effect governing our debt.

As of March 30, 2024 and April 1, 2023, we were in compliance with all covenants related to our agreements then in effect governing our debt.

See Note 12 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.

(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.

(2) As of March 30, 2024 and April 1, 2023, all amounts are recorded as long-term debt in our consolidated balance sheets, besides the Senior Notes, due in November 2024, which are recorded within short-term debt in our consolidated balance sheets as of March 30, 2024.

As of March 30, 2024, all

amounts are recorded as long-term debt in our consolidated balance sheets.

(4) The balance as of March 30, 2024 consists of primarily of $11 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 recorded within short-term debt and long-term debt, respectively, 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 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) The balance as of March 30, 2024 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 April 1, 2023, there were 17 financial institutions participating in the facility, with none maintaining a maximum commitment percentage in excess of 10%.

As of March 30, 2024, 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 treasury share repurchases during the fiscal years ended April 1, 2023 and April 2, 2022 (dollars in millions):

The following table presents our treasury share repurchases during the fiscal years ended March 30, 2024 and April 1, 2023 (dollars in millions):

Fiscal Years Ended

6 unchanged sentences

2,822,235 27,657,875

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 June 1, 2022, the Board of Directors 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 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 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.

This new two-year program replaced the Fiscal 2023 Plan.

As of March 30, 2024, 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;

The program may be suspended or discontinued at any time.

however, pursuant to the terms of the Merger Agreement, and subject to certain limited exceptions, we may not repurchase its ordinary shares other than the acceptance of our ordinary shares as payment of the exercise price of our options or for withholding taxes in respect of our equity awards.

Accordingly, we did not repurchase any of our ordinary shares since entering into the Merger Agreement pursuant to the Existing Share Repurchase Plan, and we do not expect to repurchase any of our ordinary shares in connection with the Existing Share Repurchase Plan prior to the Merger or earlier termination of the Merger Agreement.

See Note 16 to the accompanying consolidated financial statements for additional information.

Contractual Obligations and Commercial Commitments

As of April 1, 2023, our contractual obligations and commercial commitments were as follows (in millions):

As of March 30, 2024, our contractual obligations and commercial commitments were as follows (in millions):

Fiscal Years Fiscal 2025 Fiscal

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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.

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

Interest, net represents the estimated net interest income from our net investment hedges and the estimated interest expense associated with our Revolving Credit Facility, Versace Term Loan and Senior Notes based on their current interest rate.

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

Other commitments include non-cancelable contractual obligations related to marketing and advertising agreements, information technology agreements and supply agreements.

The above table excludes current liabilities (other than short-term debt and short-term operating lease liabilities) recorded as of April 1, 2023, as these items will be paid within one year, and non-current liabilities that have no cash outflows associated with them (e.g., deferred taxes).

The above table excludes current liabilities (other than short-term debt and short-term operating lease liabilities) recorded as of March 30, 2024, as these items will be paid within one year, and non-current liabilities that have no cash outflows associated with them (e.g., deferred taxes).

Off-Balance Sheet Arrangements

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

In addition to the commitments in the above table, our off-balance sheet commitments relating to our outstanding letters of credit were $35 million at April 1, 2023, including $32 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of April 1, 2023, bank guarantees of approximately $36 million were supported by our various credit facilities.

In addition to the commitments in the above table, our off-balance sheet commitments relating to our outstanding letters of credit were $32 million at March 30, 2024, including $30 million in letters of credit issued outside of the 2022 Credit Facility.

In addition, as of March 30, 2024, bank guarantees of approximately $39 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.

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