CPRI

Core Strategic Priorities

• Strengthen brand desirability through emotional, immersive storytelling that resonates with new and existing consumers
• Develop innovative, on-trend luxury products that honor each brand's unique heritage
• Deliver elevated, differentiated customer experiences across digital, retail, and wholesale touchpoints
• Leverage data analytics across the consumer journey to deliver personalized interactions
• Use growing cash flow to fund brand investments (store renovations, digital/IT enhancements) while returning capital to shareholders via share repurchases

Michael Kors Operational Highlights

• Continued execution of quality-of-sales initiatives, reducing promotional activity, third-party outlet sales, and off-price shipments, which created near-term revenue pressure but strengthened long-term brand health
• Full-price comparable sales remained positive in the Americas and China; EMEA sales declined due to reduced tourist traffic from the Middle East conflict
• Achieved higher full-price sell-throughs, growing average unit retail (AUR), and expanding gross margin, indicating improving business health
• The Q1 summer marketing campaign generated over 100 million global impressions, and celebrity presence at the Met Gala boosted brand awareness; the global consumer database grew 8% YoY
• New product launches, including smaller silhouette accessories and on-trend casual footwear, attracted younger consumers and drove improved category trends
• Two new renovated flagship stores opened with immersive Jet Set Lounge experiences; early results show significant sales increases at renovated locations

Jimmy Choo Operational Highlights

• Delivered broad-based revenue growth across all channels, regions, and categories for the third consecutive positive quarter
• The Q1 Natural Reflection marketing campaign and regional ambassador partnerships (with Wang Yibo and Bai Lu in Asia) drove strong engagement; the global consumer database grew 7% YoY
• A curated global influencer event generated nearly 50 million impressions and drove measurable sales lifts; VIC client events delivered a 40% increase in VIC sales
• Accessories sales grew double-digits YoY, led by strong performance of the iconic Bon Bon and Cinch bag franchises; expanded casual footwear assortment gained further momentum, creating long-term growth opportunities

Balance Sheet and Operational Updates

• Net debt decreased to $224 million, down from ~$1.5 billion YoY; the revolving credit facility was extended through 2031
• $50 million in shares were repurchased in Q1, with $871 million remaining in repurchase authorization
• Total inventory decreased 20% YoY, with a 25% decline at Michael Kors driven by intentional markdown inventory reductions and temporary transit delays

• Full fiscal 2027 total revenue guidance was revised downward to approximately $3.4 billion, from the prior higher outlook, driven by lower-than-anticipated Q2 inventory at Michael Kors, softer EMEA trends, and updated unfavorable foreign exchange assumptions
• Full fiscal 2027 diluted earnings per share guidance is maintained at approximately $2.15, representing 40% YoY growth, enabled by a $70 million reduction in planned operating expenses that offsets lower expected revenue
• Full fiscal 2027 operating income is expected to be ~$170 billion, a 40% YoY increase; Michael Kors is expected to deliver low double-digit operating margins, while Jimmy Choo is expected to return to profitability with low single-digit operating margins
• Second quarter 2027 total revenue guidance is ~$780 million, with Michael Kors expected to generate ~$645 million in revenue and Jimmy Choo expected to generate ~$135 million in revenue; second quarter operating income is expected to be ~$10 million, with diluted EPS of ~$0.20
• Management expects Michael Kors revenue to return to YoY growth in the back half of fiscal 2027, with total company revenue growth resuming in H2 after temporary Q2 headwinds
• Long-term targets remain unchanged: Michael Kors targets $4 billion in revenue with low 20% operating margins; Jimmy Choo targets $800 million in revenue with low double-digit operating margins

Total company first quarter fiscal 2027 revenue was $769 million, a 3.5% year-over-year (YoY) decrease. Total operating income was $28 million, with an operating margin of 3.6%, representing 110 basis points of expansion YoY.

• Michael Kors: Revenue was $590 million, a 7.1% YoY decrease, contributing 76.7% of total company revenue. By geography: Americas revenue decreased 10% YoY, EMEA revenue decreased 5% YoY, and Asia revenue increased 6% YoY. Gross margin was 63.9%, an increase of 280 basis points YoY, driven by higher full-price sell-throughs and lower tariff rates. Operating margin was 9.3%, a 60 basis point YoY decline, as gross margin gains were offset by expense deleverage from lower revenue.
• Jimmy Choo: Revenue was $179 million, a 10.5% YoY increase, contributing 23.3% of total company revenue. By geography: Americas revenue increased 26% YoY, EMEA revenue increased 5% YoY, and Asia revenue increased 3% YoY. Gross margin was 68.7%, a 170 basis point YoY decrease primarily due to channel mix. Operating margin was 7.3%, a 480 basis point YoY increase, driven by expense leverage from better-than-expected revenue and cost containment actions.

• Ongoing conflict in the Middle East has reduced tourist traffic in EMEA, creating softness in regional sales and leading management to take a more cautious outlook for the region for the remainder of the fiscal year
• Longer-than-anticipated port transit congestion in Asia caused unexpected inventory delays at Michael Kors, leading to lower-than-planned inventory levels that will reduce Q2 revenue by an estimated $50 million
• Unfavorable foreign exchange rate movements relative to prior assumptions create an estimated $10 million headwind to full year revenue
• The intentional multi-year process to reduce promotional activity and low-margin third-party outlet sales creates ongoing near-term revenue headwinds through the first half of fiscal 2027, until planned changes are fully implemented

Q: The analyst asks for a breakdown of Michael Kors' Q1 high single-digit retail decline by full price vs outlet channel, and asks for updated outlooks for Q2 and the back half of fiscal 2027, specifically after accounting for EMEA macro headwinds. / A: Management states full-price comparable sales were positive in North America and Asia, consistent with prior quarters, while EMEA full-price sales were negatively impacted by the Middle East conflict and reduced tourist traffic. Outlet sales remain negative as planned, as the brand has intentionally limited new product flow to the channel; new product will begin arriving in Q3. The planned final reduction in clearance/markdown inventory will impact Q2 sales, amplified by delayed full-price product receipts, but consumer response to new product and marketing is on track, and growth will resume in the back half.

Q: The analyst asks if the $70 million full-year expense reduction is made of one-time adjustments or a permanent change to the go-forward expense base, and requests details on the revised net interest income guidance. / A: Management confirms the $70 million expense cut comes from targeted SG&A reductions, while core investments in marketing, store renovations, and digital/IT are protected to support long-term brand health. The company will continue evaluating efficiency opportunities for the long term, and the interest income guidance was only a minor revision reflecting Q1 actual results. / A: The interest income guidance revision only reflects a minor update based on first quarter actual results, with no material change to underlying business assumptions.

Q: The analyst asks what caused the lower-than-anticipated Michael Kors inventory, how much of the decline is markdown vs full-price inventory, whether delayed sales will be lost permanently or recouped, and asks for an update on the quality-of-sales transformation timeline and current full-price sales mix. / A: The inventory shortfall is 50% intentional markdown inventory reduction ($50 million total reduction) and 50% full-price inventory delays from Asian port congestion. The congestion is temporary, and inventory will normalize by the back half of the year, with delayed sales expected to be recouped. The quality-of-sales transformation will hit a key inflection point in Q3, when the company laps the $150 million in discontinued third-party outlet sales, and Michael Kors will return to growth in the back half as planned.

Q: The analyst asks how long the headwinds from reduced markdowns and discontinued third-party/off-price sales will persist, and what geographic growth will look like for Michael Kors when it returns to growth in the back half, amid EMEA softness. / A: The $150 million in annual discontinued third-party sales will create headwinds through the first half and early Q3, with the headwind fully mitigating after October/November 2026 as the company laps the prior year comparison. Markdown inventory will remain at permanently lower historical levels, but the intentional headwind from ongoing reductions will end after Q2. EMEA softness is partially offset by continued positive growth in full-price sales in the Americas and China, which will drive back half growth.