Capri Holdings Ltd 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Our Business Capri Holdings Limited is a global fashion luxury group consisting of iconic brands Michael Kors, Jimmy Choo and Versace. Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands. We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories. Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve. Our 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 fashion luxury brand in the Americas and Europe with growing brand awareness in other international markets. 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 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 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. Taken together, our Michael Kors collections target a broad customer base while retaining our premium luxury image. Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, jewelry, scarves and belts, as well as men’s luxury shoes and accessories. 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, 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 Versace brand has long been recognized as one of the world’s leading international fashion design houses and is synonymous with Italian glamour and style. Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style and unparalleled craftsmanship. Over the past several decades, the House of Versace has grown globally from its roots in haute couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and home furnishings. Until recently, Versace’s design team was led by Donatella Versace, who had been the brand’s Artistic Director for almost 30 years. Effective April 1, 2025, Dario Vitale became Versace’s Chief Creative Officer. 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. On April 8, 2025, our Board of Directors made the decision to sell Versace to Prada, and a definitive agreement was entered into on April 10, 2025. Accordingly, we determined the Versace business met held-for-sale and discontinued operations accounting criteria beginning in Fiscal 2026 and we began to separately report the results of this business as discontinued operations in our consolidated statements of operations and comprehensive income (loss) and to present the related assets and liabilities as held for sale in our consolidated balance sheets for the first quarter ended June 28, 2025. These changes have been applied to all periods presented. Unless otherwise noted, discussion within this management’s discussion and analysis of financial condition and results of operations relates to our continuing operations. Refer to Note 4 - "Discontinued Operations" to the accompanying consolidated financial statements for additional information. Termination of the Agreement and Plan of Merger As previously disclosed, on August 10, 2023, Capri entered into an Agreement and Plan of Merger with Tapestry, a Maryland corporation, and Sunrise Merger Sub, Inc., a British Virgin Islands business company limited by shares and a direct 31 wholly owned subsidiary of Tapestry. The Merger Agreement provided that, among other things and on the terms and subject to the conditions set forth therein, Tapestry would 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. The Merger had been approved by the boards of directors of Capri and Tapestry and by the shareholders of Capri. Completion of the Merger was subject to, among other customary conditions, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Company received regulatory approval from all countries except for the United States. In connection with Tapestry’s proposed 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 (the “District Court”) 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 constituted unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined. The preliminary injunction hearing concluded in September 2024, and on October 24, 2024, the District Court granted the FTC's motion for a preliminary injunction to enjoin the Merger pending the completion of the FTC's in-house administrative proceeding. On October 28, 2024, Tapestry and Capri jointly filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”). On November 13, 2024, the parties to the Merger Agreement entered into a termination agreement pursuant to which they agreed to terminate the Merger Agreement, effective immediately. In connection with the termination, consistent with the Merger Agreement, Tapestry agreed to reimburse the Company approximately $45 million in cash for certain expenses on November 14, 2024. The parties to the Merger Agreement also agreed to release each other and their related parties from any and all liability, claims, rights, actions, causes of action, suits, liens, obligations, accounts, debts, demands, agreements, promises, liabilities, controversies, costs, charges, damages, expenses and fees (including attorney’s, financial advisor’s or other fees) in connection with, arising out of or related to the Merger Agreement or the transactions contemplated therein or thereby. On November 15, 2024, Capri and Tapestry stipulated to the dismissal of the appeal to the Second Circuit. On December 4, 2024, the FTC’s in-house administrative proceeding was dismissed without prejudice. Certain Factors Affecting Financial Condition and Results of Operations Macroeconomic conditions and inflationary pressures. Global economic conditions, including inflation, political instability due to war or other geopolitical factors and other macroeconomic uncertainty and the related impact on levels of consumer spending worldwide impacted our business in the first three months of Fiscal 2026, and are likely to continue to impact our business and the luxury accessories, footwear and apparel industry overall for the foreseeable future. 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 inflationary pressures or other economic uncertainty which could negatively affect our financial condition and results of operations. Costs of manufacturing, tariffs and import regulations. Our industry is subject to volatility in costs related to certain raw materials used in the manufacturing of our products primarily driven by commodity prices, as well as manufacturing labor costs. In addition, our costs may be impacted by sanction tariffs imposed on our products due to changes in trade terms. In April 2025, the U.S. Government announced tariffs on imports from select countries. The majority of the Company's products sold in the U.S. are imported from countries in which these tariffs were announced, including Vietnam, Cambodia, Indonesia and Bangladesh, where the primary manufacturers of Michael Kors products are located. Increased tariffs or other trade restrictions against countries where our products are manufactured, and/or any tariffs or other trade restrictions implemented by these countries in retaliation, could materially impact our revenue and profitability. Foreign currency fluctuation. 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 and the Japanese Yen, 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 United States dollar. Disruptions or delays in shipping and distribution and other supply chain constraints . Disruptions in our shipping and distribution network, including at U.S. ports and in the Red Sea, as well as port congestion, vessel availability, container shortages and temporary factory closures, have in the past impacted our business, and continued disruptions or delays could negatively impact on our results of operations in the future. 32 Segment Information We operate in three reportable segments, which are as follows: Michael Kors We generate revenue through the sale of Michael Kors products through four primary Michael Kors retail formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce sites, through which we sell our products, as well as licensed products bearing our name, directly to consumers throughout the Americas (United States, Canada and Latin America), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (Asia and Oceania). 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. In addition, revenue is generated through product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and eyewear, as well as through geographic licensing arrangements, which allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors branded products in specific geographic regions. Jimmy Choo We generate revenue through the sale of Jimmy Choo luxury goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, certain parts of EMEA and certain parts of Asia, through our e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo tradename in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through product licensing agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in connection with the manufacturing and sale of products, including fragrances and eyewear. Versace We generate revenue through the sale of Versace luxury accessories, ready-to-wear and footwear through directly operated Versace boutiques throughout North America (United States and Canada), certain parts of EMEA and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites. In addition, revenue is generated through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of the Versace Jeans Couture product line, fragrances, watches, eyewear and home furnishings. As previously noted, the results of the Versace business are excluded from the segment information herein for all periods presented. Unallocated Corporate Expenses In addition to the reportable segments discussed above, we have certain corporate costs that are not directly attributable to our brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, shared service and information technology systems expenses, including enterprise resource planning system implementation costs and Capri transformation program costs. In addition, certain other costs are not allocated to segments, including transaction related costs and restructuring and other expense. The segment structure is consistent with how our chief operating decision maker plans and allocates resources, manages the business and assesses performance. 33 The following table presents our total revenue and income from operations by segment for the three months ended June 28, 2025 and June 29, 2024 (in millions): Three Months Ended June 28, 2025 June 29, 2024 Total revenue: Michael Kors $ 635 $ 675 Jimmy Choo 162 173 Total revenue $ 797 $ 848 Cost of goods sold: Michael Kors $ 247 $ 256 Jimmy Choo 48 57 Total cost of goods sold $ 295 $ 313 Selling, general and administrative expenses: Michael Kors $ 307 $ 324 Jimmy Choo 103 105 Corporate 45 62 Total selling, general and administrative expenses $ 455 $ 491 Depreciation and amortization: Michael Kors $ 18 $ 20 Jimmy Choo 7 7 Corporate 5 5 Total depreciation and amortization $ 30 $ 32 Income from operations: Michael Kors $ 63 $ 75 Jimmy Choo 4 4 67 79 Less: Corporate expenses (50) (62) Transaction related costs — (5) Restructuring and other expense (1) (1) Income from operations $ 16 $ 11 34 The following table presents our global network of retail stores by brand: As of June 28, 2025 June 29, 2024 Number of full price retail stores (including concessions): Michael Kors 384 456 Jimmy Choo 161 170 545 626 Number of outlet stores: Michael Kors 311 308 Jimmy Choo 56 57 367 365 Total number of retail stores 912 991 The following table presents our retail stores by geographic location: As of As of June 28, 2025 June 29, 2024 Michael Kors Jimmy Choo Michael Kors Jimmy Choo Store count by region: The Americas 269 41 293 41 EMEA 141 64 156 67 Asia 285 112 315 119 695 217 764 227 Key Consolidated Performance Indicators and Statistics We use a number of key indicators of operating results to evaluate our performance, including the following (dollars in millions): Three Months Ended June 28, 2025 June 29, 2024 Total revenue $ 797 $ 848 Gross profit as a percent of total revenue 63.0 % 63.1 % Income from operations $ 16 $ 11 Income from operations as a percent of total revenue 2.0 % 1.3 % Seasonality We experience certain effects of seasonality with respect to our business. We generally experience greater sales during our third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during our first fiscal quarter. 35 Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Critical accounting policies are those that are the most important to the portrayal of our results of operations and financial condition and that require our most difficult, subjective and complex judgments to make estimates about the effect of matters that are inherently uncertain. In applying such policies, we must use certain assumptions that are based on our informed judgments, assessments of probability and best estimates. Estimates, by their nature, are subjective and are based on analysis of available information, including current and historical factors and the experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis. While our significant accounting policies are detailed in Note 3 to the accompanying consolidated financial statements, our critical accounting policies are disclosed, in full, in the MD&A section of our Annual Report on Form 10-K for the fiscal year ended March 29, 2025. There have been no significant changes to our critical accounting policies and estimates since March 29, 2025. 36 Results of Operations Comparison of the three months ended June 28, 2025 with the three months ended June 29, 2024 The following table details the results of our operations for the three months ended June 28, 2025 and June 29, 2024, 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 June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024 Statements of Operations Data: Total revenue $ 797 $ 848 $ (51) (6.0) % Cost of goods sold 295 313 (18) (5.8) % 37.0 % 36.9 % Gross profit 502 535 (33) (6.2) % 63.0 % 63.1 % Selling, general and administrative expenses 455 491 (36) (7.3) % 57.1 % 57.9 % Depreciation and amortization 30 32 (2) (6.3) % 3.8 % 3.8 % Restructuring and other expense 1 1 — — % 0.1 % 0.1 % Total operating expenses 486 524 (38) (7.3) % 61.0 % 61.8 % Income from operations 16 11 5 45.5 % 2.0 % 1.3 % Other income, net (1) — (1) NM (0.1) % — % Interest income, net (18) (4) (14) NM (2.3) % (0.5) % Foreign currency (gain) loss (5) 4 (9) NM (0.6) % 0.5 % Income from continuing operations before income taxes 40 11 29 NM 5.0 % 1.3 % (Benefit) provision for income taxes (16) 6 (22) NM (2.0) % 0.7 % Net income from continuing operations 56 5 51 NM Net loss from discontinued operations, net of tax (3) (17) 14 (82.4) % Net income (loss) 53 (12) 65 NM Less: Net income attributable to noncontrolling interest from continuing operations — 2 (2) (100.0) % Net income (loss) attributable to Capri $ 53 $ (14) $ 67 NM NM Not meaningful NM Not meaningful Total Revenue Three Months Ended % Change (in millions) June 28, 2025 June 29, 2024 $ Change As Reported Constant Currency Michael Kors $ 635 $ 675 $ (40) (5.9) % (7.3) % Jimmy Choo 162 173 (11) (6.4) % (9.2) % Total revenue $ 797 $ 848 $ (51) (6.0) % (7.7) % Total revenue decreased $51 million, or 6.0%, to $797 million for the three months ended June 28, 2025, compared to $848 million for the three months ended June 29, 2024, which included net favorable foreign currency effects of approximately $14 million, as a result of the weakening of the United States dollar compared to all major currencies in which we operate. On a constant currency basis, our total revenue decreased $65 million, or 7.7%. • Michael Kors revenue decreased $40 million, or 5.9%, to $635 million for the three months ended June 28, 2025, compared to $675 million for the three months ended June 29, 2024, which included favorable foreign currency effects of $9 million. On a constant currency basis, revenue decreased $49 million, or 7.3%, primarily attributable to a continued slowdown in demand for fashion luxury goods, particularly in North America and Asia, as well as the result of certain strategic initiatives previously put in place at Michael Kors that did not perform as expected, partially offset by increased revenue in EMEA. See Note 5 to the accompanying consolidated financial statements for additional information. 37 • Jimmy Choo revenues decreased $11 million, or 6.4%, to $162 million for the three months ended June 28, 2025, compared to $173 million for the three months ended June 29, 2024, which included favorable foreign currency effects of $5 million. On a constant currency basis, revenue decreased $16 million, or 9.2%, primarily attributable to a continued slowdown in demand for fashion luxury goods, particularly in North America and Asia. Gross Profit Three Months Ended (in millions) June 28, 2025 June 29, 2024 $ Change % Change Gross Profit: Michael Kors $ 388 $ 419 $ (31) (7.4) % Jimmy Choo 114 116 (2) (1.7) % Total gross profit $ 502 $ 535 $ (33) (6.2) % Gross Profit Margin: Michael Kors 61.1 % 62.1 % Jimmy Choo 70.4 % 67.1 % Gross profit decreased $33 million, or 6.2%, to $502 million for the three months ended June 28, 2025, compared to $535 million for the three months ended June 29, 2024, which included net favorable foreign currency effects of $9 million. Gross profit as a percentage of total revenue was 63.0% and 63.1% for the three months ended June 28, 2025 and June 29, 2024, respectively. • Michael Kors gross profit decreased $31 million, or 7.4%, to $388 million for the three months ended June 28, 2025, compared to $419 million for the three months ended June 29, 2024. The 100 basis point decrease in gross profit margin was primarily attributable to lower initial markups associated with our new pricing strategy and the unfavorable impact of recently enacted tariffs. • Jimmy Choo gross profit decreased $2 million, or 1.7%, to $114 million for the three months ended June 28, 2025, compared to $116 million for the three months ended June 29, 2024. The 330 basis point increase in gross profit margin was primarily attributable to favorable channel mix compared to the prior year. Total Operating Expenses Total operating expenses decreased $38 million, or 7.3%, to $486 million for the three months ended June 28, 2025, compared to $524 million for the three months ended June 29, 2024. Our operating expenses included a net unfavorable foreign currency impact of approximately $7 million. Total operating expenses decreased to 61.0% as a percentage of total revenue for the three months ended June 28, 2025, compared to 61.8% for the three months ended June 29, 2024. The components that comprise total operating expenses are explained below. Selling, General and Administrative Expenses Three Months Ended (in millions) June 28, 2025 June 29, 2024 $ Change % Change Selling, general and administrative expenses: Michael Kors $ 307 $ 324 $ (17) (5.2) % Jimmy Choo 103 105 (2) (1.9) % Corporate 45 62 (17) (27.4) % Total selling, general and administrative expenses $ 455 $ 491 $ (36) (7.3) % Selling, general and administrative expenses decreased $36 million, or 7.3%, to $455 million for the three months ended June 28, 2025, compared to $491 million for the three months ended June 29, 2024. As a percentage of total revenue, 38 selling, general and administrative expenses decreased to 57.1% for the three months ended June 28, 2025, compared to 57.9% for the three months ended June 29, 2024. • Michael Kors selling, general and administrative expenses decreased $17 million, or 5.2%, to $307 million for the three months ended June 28, 2025, compared to $324 million for the three months ended June 29, 2024. The decrease was primarily due to cost savings initiatives which resulted in lower personnel expenses and retail store related costs compared to the prior year. • Jimmy Choo selling, general and administrative expenses decreased $2 million, or 1.9%, to $103 million for the three months ended June 28, 2025, compared to $105 million for the three months ended June 29, 2024. The decrease was primarily due to cost savings initiatives which resulted in lower retail store related costs compared to the prior year. Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $17 million, or 27.4%, to $45 million for the three months ended June 28, 2025 as compared to $62 million for the three months ended June 29, 2024, primarily due to a decrease in professional fees related to certain Capri transformation projects which are now complete and the absence of transaction related costs incurred in the prior year. Restructuring and Other Expense During each of the three months ended June 28, 2025 and June 29, 2024, we recorded expense of $1 million primarily related to store closure costs, partially offset by gains on lease terminations. See Note 10 to the accompanying consolidated financial statements for additional information. Income from Operations Three Months Ended (in millions) June 28, 2025 June 29, 2024 $ Change % Change Income from operations: Michael Kors $ 63 $ 75 $ (12) (16.0) % Jimmy Choo 4 4 — — % 67 79 (12) (15.2) % Unallocated corporate and other expenses, net (1) (51) (68) 17 (25.0) % Income from operations $ 16 $ 11 $ 5 45.5 % Operating Margin: Michael Kors 9.9 % 11.1 % Jimmy Choo 2.5 % 2.3 % (1) Certain corporate costs are not directly attributable to our brands and, therefore, are not allocated to segments. See Note 18 to the accompanying consolidated financial statements for additional information. Income from operations was $16 million for the three months ended June 28, 2025, compared to $11 million for the three months ended June 29, 2024. Income from operations as a percentage of total revenue was 2.0% for the three months ended June 28, 2025, compared to 1.3% for the three months ended June 29, 2024. • Michael Kors recorded income from operations of $63 million for the three months ended June 28, 2025, compared to $75 million for the three months ended June 29, 2024. Operating margin decreased from 11.1% for the three months ended June 29, 2024, to 9.9% for the three months ended June 28, 2025, primarily due to deleveraging of operating expenses on lower revenues compared to the prior year. • Jimmy Choo recorded income from operations of $4 million for both the three months ended June 28, 2025 and June 29, 2024. Operating margin increased from 2.3% for the three months ended June 29, 2024 to 2.5% for the three months ended June 28, 2025, primarily due to favorable channel mix. 39 Interest Income, net For the three months ended June 28, 2025, we recognized $18 million of interest income compared to $4 million of interest income for the three months ended June 29, 2024. The $14 million improvement in interest income, net, is primarily due to higher interest income from our net investment hedges and lower average borrowings and effective interest rates on our outstanding debt (see Note 11 and Note 14 to the accompanying consolidated financial statements for additional information). Foreign Currency (Gain) Loss For the three months ended June 28, 2025, we recognized a net foreign currency gain of $5 million compared to a loss of $4 million for the three months ended June 29, 2024, primarily attributable to the remeasurement of intercompany balances between certain of our subsidiaries. (Benefit) Provision for Income Taxes The benefit for income taxes was $16 million with an effective tax rate of (40)% for the three months ended June 28, 2025, compared to a provision of $6 million with an effective tax rate of 55% for the three months ended June 29, 2024. In the current year, the decrease in our effective tax rate was primarily related to a reduction in our net valuation allowance during the period. On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act of 2025 which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. We are evaluating the future impact of these tax law changes on our consolidated financial statements. On January 10, 2025, the United States Treasury and the IRS issued final regulations that address several long-standing issues related to dual consolidated losses and introduce new rules for disregarded payment losses. The changes related to disregarded payment losses could impact how we utilize certain deductions and losses to offset our U.S. income as part of our global financing activities beginning in Fiscal 2027. We will continue to evaluate its impact as further information becomes available. 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 from Continuing Operations As a result of the above, our net income was $56 million for the three months ended June 28, 2025, compared to net income of $5 million for the three months ended June 29, 2024. 40 Liquidity and Capital Resources Liquidity Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available under our credit facilities (see below discussion regarding “Revolving Credit Facilities”) and available cash and cash equivalents. 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 opening and renovation plans, investments in corporate and distribution facilities, continued IT system development, e-commerce and marketing initiatives. We spent $13 million on capital expenditures during the three months ended June 28, 2025. We expect to spend approximately $110 million in Fiscal 2026, which includes Michael Kors and Jimmy Choo store renovations, as well as information technology and digital enhancements. The following table sets forth key indicators of our liquidity and capital resources (in millions): As of June 28, 2025 March 29, 2025 Balance Sheet Data: Cash and cash equivalents $ 129 $ 107 Working capital $ 240 $ 185 Total assets $ 5,469 $ 5,213 Short-term debt $ 21 $ 24 Long-term debt $ 1,650 $ 1,466 Three Months Ended June 28, 2025 June 29, 2024 Cash Flows Data: Operating activities $ 20 $ 66 Investing activities $ (13) $ (25) Financing activities $ 94 $ (9) Effect of exchange rate changes $ (32) $ (5) Net increase in cash and cash equivalents (1) $ 69 $ 27 (1) Net increase in cash and cash equivalents is presented on a continuing basis which differs from the Consolidated Statements of Cash Flows which is presented on a consolidated basis including discontinued operations. Cash Provided by Operating Activities Net cash provided by operating activities was $20 million during the three months ended June 28, 2025, as compared to net cash provided by in operating activities of $66 million for the three months ended June 29, 2024. The decrease in net cash provided by operating activities was primarily attributable to earlier receipt of inventory in the current year along with the timing of tax payments made compared to the prior year. Cash Used in Investing Activities Net cash used in investing activities was $13 million during the three months ended June 28, 2025, as compared to net cash used in investing activities of $25 million during the three months ended June 29, 2024. The decrease in net cash used in investing activities was primarily attributable to the $9 million acquisition of an Italian shoe manufacturer in the prior year. Cash Provided by (Used in) Financing Activities Net cash provided by financing activities was $94 million during the three months ended June 28, 2025, as compared to net cash used in financing activities of $9 million during the three months ended June 29, 2024. The increase in cash provided by financing activities of $103 million was primarily attributable to higher net debt borrowings of $101 million. 41 Debt Facilities The following table presents a summary of our borrowing capacity and amounts outstanding as of June 28, 2025 and March 29, 2025 (in millions): As of June 28, 2025 March 29, 2025 Revolving Credit Facility (1) Total availability $ 1,500 $ 1,500 Borrowings outstanding (2) 912 755 Letter of credit outstanding 2 1 Remaining availability $ 586 $ 744 2025 Term Loans Borrowings outstanding, net of debt issuance costs (2) $ 732 $ 706 Other Borrowings (3) $ 27 $ 29 Hong Kong Uncommitted Credit Facility: Total availability (45 million Hong Kong Dollars) (4) $ 6 $ 6 Borrowings outstanding — — Remaining availability (45 million Hong Kong Dollars) $ 6 $ 6 China Uncommitted Credit Facility: Total availability (75 million Chinese Yuan) (4) $ 11 $ 10 Borrowings outstanding — — Total and remaining availability (75 million Chinese Yuan) $ 11 $ 10 Japan Credit Facility: Total availability (1.0 billion Japanese Yen) $ 7 $ 7 Borrowings outstanding — — Remaining availability (1.0 billion Japanese Yen) $ 7 $ 7 Total borrowings outstanding (1) $ 1,671 $ 1,490 Total remaining availability $ 610 $ 767 (1) The financial covenant in our 2025 Credit Facilities requires us to comply with a quarterly maximum net leverage ratio test of 4.0 to 1.0. The Revolving Credit Facility excludes up to a $750 million accordion feature as of June 28, 2025 and March 29, 2025, respectively. As of June 28, 2025 and March 29, 2025, we were in compliance with all covenants related to our agreements then in effect governing our debt. See Note 11 to the accompanying consolidated financial statements for additional information. (2) As of June 28, 2025 and March 29, 2025, all amounts are recorded as long-term debt on our consolidated balance sheets. (3) The balance as of June 28, 2025 primarily consists of $21 million related to our supplier financing program recorded within short-term debt in our consolidated balance sheets and $6 million of other loans recorded as long-term debt on our consolidated balance sheets. The balance as of March 29, 2025 consists of $24 million related to our supplier finance program recorded within short-term debt on our consolidated balance sheets and $5 million of other loans recorded as long-term debt in our consolidated balance sheets. (4) The balance as of June 28, 2025 and March 29, 2025 represents the total availability of the credit facility, which excludes bank guarantees. 42 We believe that our 2025 Credit Facilities is adequately diversified with no undue concentration in any one financial institution. As of June 28, 2025, 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 2025 Credit Facilities. See Note 11 in the accompanying financial statements and Note 12 in our Fiscal 2025 Annual Report on Form 10-K for detailed information relating to our credit facilities and debt obligations. Share Repurchase Program The following table presents our treasury share repurchases during the three months ended June 28, 2025 and June 29, 2024 (in millions): Three Months Ended June 28, 2025 June 29, 2024 Cost of shares repurchased under share repurchase program $ — $ — Fair value of shares withheld to cover tax obligations for vested restricted share awards 1 3 Total cost of treasury shares repurchased $ 1 $ 3 Shares repurchased under share repurchase program — — Shares withheld to cover tax withholding obligations 86,365 93,738 86,365 93,738 On November 9, 2022, we announced that our Board of Directors approved a two-year share repurchase program to purchase up to $1.0 billion of our outstanding ordinary shares. 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. However, pursuant to the terms of the previously terminated Merger Agreement, and subject to certain limited exceptions, we were prohibited from repurchasing our ordinary shares other than the acceptance of our ordinary shares as payment of the exercise price of our options or for withholding taxes with respect of our equity awards. Accordingly, we did not repurchase any of our ordinary shares during the pendency of the Merger Agreement pursuant to the share repurchase program. The share repurchase program expired on November 9, 2024. See Note 15 to the accompanying consolidated financial statements for additional information. Contractual Obligations and Commercial Commitments Please refer to the “Contractual Obligations and Commercial Commitments” disclosure within the “Liquidity and Capital Resources” section of our Fiscal 2025 Form 10-K for a detailed disclosure of our other contractual obligations and commitments as of March 29, 2025. Off-Balance Sheet Arrangements We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating our business. Our off-balance sheet commitments relating to our outstanding letters of credit were $27 million at June 28, 2025, including $25 million in letters of credit issued outside of the 2025 Credit Facilities. In addition, as of June 28, 2025, bank guarantees of approximately $31 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. Recent Accounting Pronouncements See Note 3 to the accompanying interim consolidated financial statements for recently issued accounting standards, which may have an impact on our financial statements and/or disclosures upon adoption. 43