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Capri Holdings Limited Announces First Quarter Fiscal 2021 Results

LONDON , August 05 /Businesswire/ - Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the first quarter of fiscal 2021 ended June 27, 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200805005384/en/

VERSACE (Photo: Business Wire)

VERSACE (Photo: Business Wire)

First Quarter Fiscal 2021 Highlights

  • First quarter revenue decline of 66.5%, better than the company's initial expectation
  • First quarter adjusted gross margin expansion of 480 basis points versus prior year
  • First quarter adjusted loss per share of $1.04
  • Ended the first quarter with approximately $1.1 billion of liquidity

John D. Idol, the Company’s Chairman and Chief Executive Officer, said, "The COVID-19 pandemic continues to profoundly impact the entire world. My thoughts and prayers go out to all those who have been affected by the virus and to everyone on the front lines who are tirelessly helping combat this pandemic. At Capri Holdings, we are prioritizing the health and safety of our employees, customers and communities as our stores continue to reopen around the globe. I want to thank our teams around the world for the hard work and dedication they demonstrate every day to support each other and their communities during this unprecedented time."

Mr. Idol continued, "Looking at our progress in the fiscal first quarter, we were encouraged by trends across all three of our luxury houses, with sales and margin performance ahead of our initial expectations. We were particularly pleased with the strong growth of our eCommerce business, as well the sequential improvement in overall revenue trends through the first quarter and into July."

Mr. Idol concluded, "During these unprecedented times, we plan to continue to execute on our strategic growth initiatives and remain confident in the long-term opportunities for each of our unique global luxury houses. Capri Holdings has a portfolio of three iconic, founder-led fashion luxury brands that have enduring value and a long history of successfully navigating challenging periods. We will continue to carefully guide our business through the current retail environment, while positioning the company to resume its growth trajectory in fiscal 2022."

First Quarter Fiscal 2021 Results

Financial Results and non-GAAP Reconciliation

The company’s results are reported in this press release in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and on an adjusted, non-GAAP basis. A reconciliation of GAAP to non- GAAP financial information is provided at the end of this press release. Due to the current and ongoing impact of the COVID-19 pandemic, the company will not be providing comparable store sales results. The company believes the most comprehensive measure of performance in this environment is total revenues compared to the same period in the prior year.

Overview of Capri Holdings First Quarter Fiscal 2021 Results:

  • Total revenue of $451 million decreased 66.5% compared to last year. On a constant currency basis, total revenue decreased 66.2%.
  • Gross profit was $302 million and gross margin was 67.0%, compared to $834 million and 62.0% in the prior year. Adjusted gross profit was $303 million and adjusted gross margin was 67.2%, compared to $840 million and 62.4% in the prior year.
  • Loss from operations was $162 million and operating margin was (35.9)% compared to income of $64 million and operating margin of 4.8% in the prior year. Adjusted loss from operations was $147 million and operating margin was (32.6)%, compared to operating income of $190 million and 14.1% in the prior year.
  • Net loss was $180 million, or $(1.21) per diluted share compared to net income of $45 million, or $0.30 per diluted share in the prior year. Adjusted net loss was $156 million, or $(1.04) per diluted share, compared to income of $145 million or $0.95 per diluted share.
  • Net inventory at June 27, 2020 was $948 million, a 7% decrease compared to the prior year.

Versace First Quarter Fiscal 2021 Results:

  • Versace revenue of $93 million decreased 55.1% compared to the prior year. On a constant currency basis, total revenue decreased 54.1%.
  • Versace operating loss was $41 million and operating margin was (44.1)% compared to an operating loss of $3 million and operating margin of (1.4)% in the prior year. Last year, adjusted operating income was $3 million and adjusted operating margin was 1.4%.

Jimmy Choo First Quarter Fiscal 2021 Results:

  • Jimmy Choo revenue of $51 million decreased 67.7% compared to the prior year on a reported and constant currency basis.
  • Jimmy Choo operating loss was $29 million and operating margin was (56.9)%, compared to operating income of $11 million and operating margin of 7.0% in the prior year.

Michael Kors First Quarter Fiscal 2021 Results:

  • Michael Kors revenue of $307 million decreased 68.7% compared to the prior year. On a constant currency basis, total revenue decreased 68.5%.
  • Michael Kors operating loss was $48 million and operating margin was (15.6)%, compared to operating income of $201 million and operating margin of 20.5% in the prior year.

Fiscal Year 2021 Outlook

Due to the lack of visibility surrounding the pandemic, macroeconomic fundamentals and tourism, the impacts on our financial and operating results cannot reasonably be estimated at this time. Therefore, the company is not providing earnings guidance for its fiscal year 2021.

Conference Call Information

A conference call to discuss first quarter fiscal 2021 results is scheduled for today, August 5, 2020 at 8:30 a.m. ET. A live webcast of the conference call will be available on the Company’s website, www.capriholdings.com. In addition, a replay will be available shortly after the conclusion of the call and remain available until August 12, 2020. To access the telephone replay, listeners should dial 1-844-512-2921 or 1-412-317-6671 for international callers. The access code for the replay is 10010472. A replay of the webcast will also be available within two hours of the conclusion of the call.

Use of Non-GAAP Financial Measures

Constant currency effects are non-GAAP financial measures, which are provided to supplement our reported operating results to facilitate comparisons of our operating results and trends in our business, excluding the effects of foreign currency rate fluctuations. Because we are a global company, foreign currency exchange rates may have a significant effect on our reported results. We calculate constant currency measures and the related foreign currency impacts by translating the current year’s reported amounts into comparable amounts using prior year’s foreign exchange rates for each currency. All constant currency performance measures discussed below should be considered a supplement to and not in lieu of our operating performance measures calculated in accordance with U.S. GAAP. Additionally, this earnings release includes certain non-GAAP financial measures that exclude certain costs associated with COVID-19 related charges, long-lived asset impairments, ERP implementation costs, Capri transformation costs, restructuring and other charges. The Company uses non-GAAP financial measures, among other things, to evaluate its operating performance and in order to represent the manner in which the Company conducts and views its business. The Company believes that excluding these items helps its management and investors compare operating performance based on its ongoing operations. While the Company considers the non- GAAP measures to be useful supplemental measures in analyzing its results, they are not intended to replace, nor act as a substitute for, any amounts presented in its consolidated financial statements prepared in conformity with U.S. GAAP and may be different from non-GAAP measures reported by other companies.

About Capri Holdings Limited

Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design, style and craftsmanship. Its brands cover the full spectrum of fashion luxury categories including women’s and men’s accessories, footwear and ready-to-wear as well as wearable technology, watches, jewelry, eyewear and a full line of fragrance products. The Company’s goal is to continue to extend the global reach of its brands while ensuring that they maintain their independence and exclusive DNA. Capri Holdings Limited is publicly listed on the New York Stock Exchange under the ticker CPRI.

Forward Looking Statements

This press release contains statements which are, or may be deemed to be, “forward-looking statements.” Forward- looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of Capri Holdings Limited (the “Company”) about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “plans”, “believes”, “expects”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “might” or similar words or phrases, are forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements. These risks, uncertainties and other factors include the effect of the COVID-19 pandemic and its potential material and significant impact on the Company’s future financial and operational results if retail stores are forced to close again and the pandemic is prolonged, including that our estimates could materially differ if the severity of the COVID-19 situation worsens, the length and severity of such outbreak across the globe and the pace of recovery following the COVID-19 pandemic, levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition; the risk of disruptions to the Company’s businesses; the negative effects of events on the market price of the Company’s ordinary shares and its operating results; significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the Company’s businesses; fluctuations in demand for the Company’s products; levels of indebtedness (including the indebtedness incurred in connection with acquisitions); the timing and scope of future share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash; changes in consumer traffic and retail trends; loss of market share and industry competition; fluctuations in the capital markets; fluctuations in interest and exchange rates; the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes; political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as those risks set forth in the Company’s filings with the U.S. Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended March 28, 2020 (File No. 001-35368). Any forward-looking statement in this press release speaks only as of the date made and the Company disclaims any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.

SCHEDULE 1

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except share and per share data)

(Unaudited)

 
 

Three Months Ended

 

 

June 27,

2020

 

June 29,

2019

Total revenue

 

$

451

 

 

$

1,346

 

Cost of goods sold

 

 

149

 

 

 

512

 

Gross profit

 

 

302

 

 

 

834

 

Total operating expenses

 

 

464

 

 

 

770

 

(Loss) income from operations

 

 

(162

)

 

 

64

 

Other income, net

 

 

(1

)

 

 

(2

)

Interest expense, net

 

 

17

 

 

 

13

 

Foreign currency (gain) loss

 

 

(3

)

 

 

2

 

(Loss) income before provision for income taxes

 

 

(175

)

 

 

51

 

Provision for income taxes

 

 

5

 

 

 

6

 

Net (loss) income attributable to Capri

 

$

(180

)

 

$

45

 

 

Weighted average ordinary shares outstanding:

 

 

 

 

Basic

 

 

149,556,310

 

 

 

151,049,572

 

Diluted

 

 

149,556,310

 

 

 

152,334,153

 

 

Net (loss) income per ordinary share:

 

 

 

 

Basic

 

$

(1.21

)

 

$

0.30

 

Diluted

 

$

(1.21

)

 

$

0.30

 

SCHEDULE 2

CAPRI HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

 

 

 

June 27,

2020

 

March 28,

2020

 

June 29,

2019

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

207

 

 

$

592

 

 

$

160

 

Receivables, net

 

 

183

 

 

 

308

 

 

 

310

 

Inventories, net

 

 

948

 

 

 

827

 

 

 

1,016

 

Prepaid expenses and other current assets

 

 

151

 

 

 

167

 

 

 

337

 

Total current assets

 

 

1,489

 

 

 

1,894

 

 

 

1,823

 

Property and equipment, net

 

 

541

 

 

 

561

 

 

 

608

 

Operating lease right-of-use assets

 

 

1,641

 

 

 

1,625

 

 

 

1,718

 

Intangible assets, net

 

 

1,977

 

 

 

1,986

 

 

 

2,250

 

Goodwill

 

 

1,490

 

 

 

1,488

 

 

 

1,652

 

Deferred tax assets

 

 

226

 

 

 

225

 

 

 

111

 

Other assets

 

 

169

 

 

 

167

 

 

 

221

 

Total assets

 

$

7,533

 

 

$

7,946

 

 

$

8,383

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

596

 

 

$

428

 

 

$

355

 

Accrued payroll and payroll related expenses

 

 

94

 

 

 

93

 

 

 

96

 

Accrued income taxes

 

 

34

 

 

 

42

 

 

 

36

 

Current operating lease liabilities

 

 

431

 

 

 

430

 

 

 

408

 

Short-term debt

 

 

191

 

 

 

167

 

 

 

514

 

Accrued expenses and other current liabilities

 

 

243

 

Photo/Multimedia, Europe, United States, United Kingdom, North America, New York, Fashion, Retail, Consumer, Teens, Women, Specialty, Webcast, Conference Call, Earnings,
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