Capri Holdings Ltd. Q4 FY2022 earnings call

• Recognized the hard work of teams globally and showed empathy for those impacted by the war in Ukraine, making charitable donations.
• Fourth quarter results exceeded expectations despite supply chain challenges, COVID restrictions in China, and war in Ukraine. Total revenue up 25%, operating margin 14.2%, EPS $1.02.
• Versace: Fourth quarter revenue up 34%, full year revenue over $1 billion, operating margin 17%. Launched Versace Foundation with $10M pledge.
• Jimmy Choo: Fourth quarter revenue up 26%, full year revenue $613M, operating margin 2.1%. Launched first jewelry collection.
• Michael Kors: Fourth quarter revenue up 22%, full year revenue $3.95B, operating margin 25.4%. Global retail AURs up double-digits.

Versace: Fourth quarter revenue was $315 million, up 34% year-over-year or 44% in constant currency. Full year revenue exceeded $1 billion. Jimmy Choo: Fourth quarter revenue was $156 million, up 26% year-over-year or 29% in constant currency. Full year revenue was $613 million. Michael Kors: Fourth quarter revenue was $1.02 billion, up 22% year-over-year or 24% in constant currency. Full year revenue was $3.95 billion. Revenue contributions: Each brand's performance contributed to the overall growth, with Michael Kors being the largest contributor in terms of revenue.

• Fiscal 2023 revenue forecast: ~$5.95B, ~5% reported growth, ~10% constant currency growth. Gross margin flat to fiscal 2022. Operating margin ~18%. EPS ~$6.85.
• First quarter 2023 guidance: Total company revenue ~$1.3B, ~4% reported growth, ~9% constant currency growth. Mainland China revenue down ~40% in Q1, expected to improve in Q2.
• Brand-wise guidance: Versace ~$1.225B (+13% reported, +23% constant currency), Jimmy Choo ~$650M (+6% reported, +9% constant currency), Michael Kors ~$4.075B (+3% reported, +6% constant currency).

• Supply chain challenges continuing to impact operations.
• COVID-related restrictions in China affecting revenue, with Q1 2023 expected to be significantly impacted.
• War in Ukraine impact, including removal of revenue from Russia.
• Foreign exchange headwinds, particularly from a stronger U.S. dollar.

Q: What's being seen in Asia, especially Mainland China, and expectations for Q2 and beyond?

A: North American consumer remains strong. Europe has strong rebound but war in Ukraine impacts Russia. In Asia, lockdowns in China are a longer-term rebound, with Shanghai and Beijing starting to reopen, but first quarter guidance reflects significant impact with expectation of improvement in Q2 and beyond.

Q: Thoughts on promotional discipline and pricing strategy?

A: Promotional activity reduced across all brands. Michael Kors continuing to step down promotions and raise prices to move upmarket. Inventories elevated by design to bring in core products earlier and adjust design calendar to mitigate supply chain issues.

Q: Pricing progress by brand?

A: Jimmy Choo and Versace had price increases, with more to come. Jimmy Choo moved to luxury pricing with no pushback. Versace has room to grow in accessories. Michael Kors to continue moving upmarket with price increases.

Q: Gross margin context and structural vs temporary headwinds?

A: Strong benefits from strategic initiatives like pricing, full price sell-through, and accessories growth. Supply chain costs expected to remain elevated, with biggest impact in Q1. China lockdowns and other temporary cost pressures impact margin, with moderation expected through the year.

Q: Trend of dress events and men's opportunity?

A: Trend of dress events likely to continue. Men's business strong, with healthy growth in dressed-up areas and sneaker business as opportunity.

Q: Pricing gap and launch of Versace and Choo into accessories?

A: All brands to take price increases in fall. Versace has opportunity to move up in accessories, starting from lower luxury price point. Jimmy Choo positioned more in middle luxury. Michael Kors to move further upmarket.