Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
The risk factors previously included in our Annual Report on Form 10-K for the fiscal year ended March 30, 2024 under the heading "Risk Factors" are updated to include the following:
Risks Relating to the Terminated Merger with Tapestry
Our inability to execute on our standalone business strategies following the termination of the Merger Agreement could have a material adverse effect on our business, results of operations and financial condition.
The uncertainties and restrictions on our business during the pendency of the Merger limited us from pursuing certain business opportunities and taking certain actions. The long-term growth of our business depends on the successful execution of our strategic initiatives. Our achievement of revenue and profitability growth will depend largely upon our ability to offer trendsetting and innovative products, increase brand engagement, and optimize customer experience. We cannot assure you that we can execute successfully any of these actions or deliver growth and profitability for our brands. If we are unable to successfully execute our business strategies, our business, results of operations and financial condition could be materially adversely affected.
We are subject to shareholder litigation relating to the terminated Merger.
On December 23, 2024 and January 28, 2025, two purported shareholders of Capri filed putative class action complaints in the United States District Court for the District of Delaware against Capri, Tapestry and certain of their officers (including John D. Idol, our Chairman and Chief Executive Officer, and Thomas J. Edwards, Jr., our Chief Financial and Chief Operating Officer) alleging violations of the federal securities laws based on public statements relating to the previously terminated merger between Capri and Tapestry. The Federal Securities Law Complaints seek to bring federal securities claims on behalf of a class of all persons who purchased Capri stock and sold Capri puts between August 10, 2023 and October 24, 2024. We may incur substantial costs defending these Federal Securities Law Complaints (or other similar actions), and we cannot provide assurance regarding the outcome of these Federal Securities Law Complaints or any similar matters. An unfavorable judgment or ruling could result in substantial liability. We may also be subject to additional demands or filed actions. Our potential liability to shareholders for federal securities claims or other matters related to the previously terminated Merger may be covered in part by our insurance policies, but we may not always have adequate insurance to defend all claims.
Risks Related to Our Business
We may incur significant goodwill and/or intangible asset impairment charges with respect to one or more of our brands which could have a material adverse impact on our results of operations and financial condition.
If the carrying value of the reporting units for one or more of our brands exceeds the related fair value we are required to record impairment charges for the difference, and those impairment charges could be significant. During the third quarter of Fiscal 2025, the Company identified impairment indicators due to the reduction of our share price following the termination of the Merger Agreement, continued softening of consumer demand for fashion luxury goods globally and the continuing decline in operating results during the third quarter impacting all three of the Company’s brands. As a result of the Company’s impairment assessment, the Company recorded $671 million of impairment charges, related to our Jimmy Choo and Versace goodwill and intangible assets during the three and nine months ended December 28, 2024. It is possible that our conclusions regarding impairment or recoverability of goodwill or other intangible assets could change in future periods if, for example, (i) our businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions, (iii) business conditions or strategies change from our current assumptions, (iv) discount rates change, (v) market multiples change or (vi) the identification of our reporting units change, among other factors. Such changes could result in future impairment charges of goodwill or other intangible assets and such amounts could be significant, which could have a material adverse impact on our results of operations and financial condition.
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