Q4 2025 Capri Holdings Ltd Earnings Call
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Greetings welcome to Capri Holdings limited fourth quarter fiscal 2025 financial results earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow with a formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Speaker Change: Please note. This conference is being recorded I will now turn the conference over to Jennifer Davis, Vice President of Investor Relations. Thank you you may begin.
Speaker Change: Good morning, everyone and thank you for joining us on Capri Holdings limited fourth quarter and full year fiscal 2025 conference call with me. This morning are chairman and Chief Executive Officer, John Idol, and Chief Financial and Chief Operating Officer, Tom Edwards.
Speaker Change: Before we begin let me remind you that certain statements made on today's call may constitute forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those we expect.
Speaker Change: Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.
Speaker Change: Investors should not assume that the statements made during this call will remain operative at a later time and the company undertakes no obligation to update any information discussed on today's call.
Unless otherwise noted all financial information on today's call will be presented on a non-GAAP basis. These.
Speaker Change: These non-GAAP measures exclude certain cost associated with impairment charges restructuring and other charges ERP implementation costs Capri transformation costs and transaction related expenses.
View, the corresponding GAAP measures and related reconciliation. Please review our latest earnings release posted on our website earlier today at Capri Holdings Dot com.
Speaker Change: I would also like to note that given the pending sale of Versace beginning in fiscal 'twenty six we will reclassify versace as a discontinued operation, which means they will no longer be included in our non-GAAP result.
Speaker Change: Therefore, our comments on today's call will focus only on Michael Kors and Jimmy Choo.
John Idol: Now I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer.
John Idol: Sean.
Speaker Change: Thank you Jennifer.
Speaker Change: Good morning, everyone.
I would like to begin today's call by discussing our recent announcement regarding the pending sale of Versace to product group.
Speaker Change: After careful evaluation, we concluded that the most effective way to maximize value.
Speaker Change: Pretty holdings.
To focus our resources on the compelling growth opportunities within our Michael Kors and Jimmy Choo brands.
Speaker Change: This transaction also positions us to substantially reduce our debt levels and reinstate a share repurchase program in the future.
Speaker Change: Both are important steps towards enhancing shareholder returns.
Speaker Change: Additionally, a strengthened financial foundation will enable us to more aggressively invest in reinvigorating the Michael Kors brand.
With our new strategic initiatives in place.
Speaker Change: Our strong balance sheet.
Speaker Change: And focused senior leadership team.
We are well positioned to accelerate the growth trajectory.
Speaker Change: Both Michael Kors and Jimmy Choo.
Speaker Change: Entering fiscal 2026.
Speaker Change: We're optimistic about our path forward.
While the macro environment has become more challenging with uncertainty around tariffs we.
We remain focused on executing against our strategic initiatives.
Speaker Change: That are designed to improve current sales trends and position the company for future growth.
Speaker Change: Across our luxury houses.
We are focused on building brand desirability through.
Speaker Change: Through compelling storytelling.
Speaker Change: Exciting fashion luxury product and engaging omni channel consumer experience.
While our strategies are tailored uniquely for each brand our overarching goals are similar.
First in terms of building brand desirability.
Our primary objective is to engage and inspire both new and existing consumers.
Speaker Change: Second in terms of product, we are committed to creating exciting fashion designs and further enhancing our core styles, many of which feature our iconic brand codes.
Third our retail Omnichannel strategy entails leveraging our enhanced data analytics and digital.
Speaker Change: Capabilities to grow e-commerce revenues as well as increased store sales densities.
Speaker Change: Fourth we are focused on stabilizing and returning our wholesale business to grow.
Speaker Change: Now turning to our fourth quarter fiscal 2025 results.
Speaker Change: Overall, our business remains challenged and we were disappointed with our performance.
Speaker Change: Revenue decreased 15% during the quarter.
Speaker Change: As we were impacted by the continued softening demand for fashion and luxury goods globally.
Speaker Change: Our performance was further affected by store closures as well as ongoing reductions in the wholesale channel.
Speaker Change: At Michael Kors fourth quarter revenue decreased 16% compared to prior year.
Speaker Change: Despite these results we began to see encouraging signs of progress stemming from our new brand storytelling and product initiatives during the fourth quarter.
Speaker Change: And our own retail channel, we saw a sequential improvement in March.
Speaker Change: Accelerated into the first quarter.
Speaker Change: Michael Kors is a powerful fashion luxury brand that has a strong heritage and we are eager to build on this solid foundation.
Speaker Change: Guided by the insights gained from our data analytics and consumer feedback. We believe we have the right strategies underway to return the brand to growth overtime.
Speaker Change: First we are focused on engaging new and existing consumers to a modern interpretation of our jet set heritage based on our brand vision.
Speaker Change: Of traveling the world and style.
Speaker Change: Second we are reinforcing our iconic brand codes and creating exciting product with compelling value to drive higher full price sell throughs.
Speaker Change: Third we are focusing on improving store productivity through our optimization program, which includes store closures and renovations.
And fourth we plan to stabilize our wholesale business and returned to modest growth in the future.
Speaker Change: In February we launched our new jet set storytelling, which reconnect with the heritage of the Michael Kors brand through our new brand vision of traveling the world and style.
Speaker Change: We are amplifying our storytelling strategies around a new franchise called hotel stories.
Speaker Change: A series of captures and conveys the very essence of our brand.
The first chapter of hotel stories took place in the visa.
At the month of Sol Hotel, featuring English actress.
Speaker Change: And singer Suki Waterhouse.
Speaker Change: The story features exciting fashion moments captured in a visa.
And at the hotel, while celebrating the joy of traveling the world and style.
We are pleased with the consumer reception to our new jet set brand vision and believe it is helping us reignite brand desirability.
Speaker Change: According to our consumer insights, we have seen an inflection in brand affinity as well as a significant improvement in purchase intent.
Speaker Change: Additionally, our new storytelling is generating higher engagement across social media.
Speaker Change: We continue to believe that one of our most valuable assets and key differentiators.
Speaker Change: As our founder and Chief Creative Officer, Michael of course.
Speaker Change: As a world renowned fashion designer his iconic runway shows cast a powerful halo over the brand.
Speaker Change: Michael's fall Winter 2025 runway show channeled relaxed chic and a space inspired by a classic downtown New York Loft.
Speaker Change: Attendees included so Keith Waterhouse, Puma, Thurman, Kerry, Washington, and Lee and Michelle among others.
Speaker Change: During New York Fashion week, Michael Kors was the second most engaged fashion brand on social media.
Speaker Change: The show generated over 170 million impressions.
Speaker Change: And 60 million video views.
Speaker Change: The combined power of our jets that storytelling and data analytics capabilities helped contribute to a 10% year over year increase in Michael Kors Global consumer database.
Speaker Change: Now turning to product.
Speaker Change: At its core our strategy is centered around designing fashion products with standout style and compelling value.
Speaker Change: During the fourth quarter, we launched several new accessories groups that celebrate our iconic brand codes and are aligned with our new strategic pricing architecture.
Speaker Change: We are seeing an overwhelmingly positive response from consumers across these platforms.
Speaker Change: Our new Layla Dakota, and Brian groups are experiencing extremely strong full price sell throughs and attracting new consumers to the brand.
Speaker Change: Additionally, we are seeing renewed momentum in our iconic core signature groups.
Speaker Change: We are pleased with the green shoots emerging within accessories.
Speaker Change: And are working diligently to apply the same strategies through our footwear and apparel business.
Speaker Change: Next I would like to discuss our store renovation plans.
Speaker Change: Retail stores are critical pillar.
Speaker Change: Driving our sales recovery.
Speaker Change: And we believe our global store renovation program will help change Michael Kors sales trajectory.
Speaker Change: Over the next three years, we plan to renovate approximately 50% of the store fleet.
Speaker Change: As well as key department store locations.
Speaker Change: Our new store design concept reflects a modern and warm residential aesthetic.
Speaker Change: With our store renovation process now underway, we look forward to sharing our progress and results with you in the future.
Speaker Change: Now I would like to take a few moments to address current quarter to date trends.
Speaker Change: Overall first quarter trends to date reflect an improvement in sales momentum.
We are also beginning to see improving trends and key indicators that we closely monitor including our consumer database door traffic and AUR.
Speaker Change: The Michael Kors customer database continues to grow both month over month and year over year.
Speaker Change: Underscoring the continued strength and desirability of the brand.
Speaker Change: Additionally, we have seen even more robust growth in our VIP loyalty consumer base.
Speaker Change: In terms of store traffic trends, we have begun to see a moderation in the rate of decline.
Speaker Change: And lastly in terms of AUR in our full price retail stores quarter to date trends turned positive.
Speaker Change: Overall, we've been moving very quickly to execute our exciting next chapter for Michael Kors.
Speaker Change: One that is built on the strength of our heritage and guided by our consumer insights.
Speaker Change: While still in the early stages of our turnaround initiatives, we are seeing positive indicators.
That our strategies are beginning to work.
Speaker Change: Now moving to Jimmy Choo.
Fourth quarter revenue decreased 3% compared to prior year.
Speaker Change: Jimmy Choo is an iconic globally recognized brand with a sense of glamour.
Speaker Change: And they playfully daring spirit.
Over its 29 year history, Jimmy Choo has built a reputation for its dedication the time honored craftsmanship and innovative design.
Speaker Change: We have a renewed focus on Jimmy Choo and are developing strategies to realize the full potential of this highly recognized luxury brand.
Speaker Change: First we are committed to engaging and energizing, both new and loyal consumers.
Speaker Change: Storytelling centered around an empowered sense of glamour.
Speaker Change: Second we are focused on growing accessories, and expanding our casual footwear offering.
Speaker Change: Third we are taking actions to enhance store productivity and elevate our retail experience.
Speaker Change: And fourth we intend to stabilize and return our wholesale businesses to growth.
Speaker Change: During the fourth quarter.
Speaker Change: We saw strong performance in new accessories styles, including our diamond and synch bags.
Speaker Change: The Cinch group.
Speaker Change: Has been the fastest selling Jimmy Choo de bag in the last five years.
Speaker Change: Looking ahead.
Speaker Change: We will build upon the momentum of these successful platforms by introducing new materials and animations each season.
Speaker Change: At the same time, we will continue to reinforce our leadership in evening bags.
Speaker Change: Through an ongoing commitment to innovation craftsmanship and glamorous design.
Speaker Change: Additionally, we have significant potential to broaden jimmy choose reach by expanding our pricing architecture and attracting new audiences.
Speaker Change: In the fall season.
Speaker Change: We will be introducing a wider offering of accessories, including three new collections priced between $501000.
Speaker Change: To appeal to a broader base of luxury consumers.
Speaker Change: We believe this initiative will significantly increase sales in accessories.
Speaker Change: Which in turn should strengthen the brands positioning and increase store productivity.
Speaker Change: In footwear, we continued to see declines across the dress category consistent with industry trends.
Speaker Change: We are focused on bringing newness to this category with innovation and animation.
Speaker Change: The recently launched Scarlet featuring our iconic dropped heel is a good example of a new style that is generating excitement and strong sell throughs.
Speaker Change: We continue to believe there is a meaningful opportunity to expand our casual offering.
Speaker Change: Our sneaker business has grown to approximately 10% of our footwear sales.
Speaker Change: And we're introducing new styles to further expand this category.
Speaker Change: For example, during the fourth quarter, we launched.
Speaker Change: The Diamond flex.
Speaker Change: A new sneaker with an ultra soft construction featuring a flexible lightweight salt.
Speaker Change: Sales of the Diamond flex far exceeded our expectations.
Speaker Change: And it has been the fastest selling sneaker.
Speaker Change: Sneaker.
Speaker Change: And Jimmy Choo is history.
Speaker Change: Turning to brand awareness and consumer engagement.
Speaker Change: Our storytelling continues to focus on glamour, igniting joy and empowering achievement.
Speaker Change: For spring are initiatives emphasize new seasonal styles, featuring American actress and fashion icon.
Speaker Change: Hello, a seven year.
Speaker Change: Additionally to celebrate the opening of our new Madison Avenue flagship store as well as debut our spring collection, we hosted a series of high impact events or Influencers and clients during New York fashion week.
Speaker Change: These brand events generated strong engagement and broad social media amplification, driving 20 million impressions across key digital platforms.
Speaker Change: Complementing these efforts Jimmy Choo debut debuted.
Speaker Change: Exclusive campaigns around the launch.
Speaker Change: Of our new Diamond trainer styles, featuring brand Ambassador Wagging Evo.
Speaker Change: We also partnered with Influencers to create social media posts. These.
Speaker Change: These activities generated strong engagement and resulted in nearly 50 million impressions across social media platforms.
Speaker Change: Our engaging consumer communication.
Speaker Change: Which combine storytelling with data analytics help contribute to an 11% year over year increase in Jimmy Choo Global consumer database.
Speaker Change: With our renewed focus on strategic initiatives, we were establishing the essential building blocks to fully harnessed, Jimmy choose unique potential and expand its position within the world of fashion luxury.
Speaker Change: In conclusion as we enter fiscal 2026, we are optimistic about our path forward.
Speaker Change: While still early we are beginning to see positive indicators that give us confidence that our strategies are working.
Speaker Change: Looking ahead.
Speaker Change: We continue to expect trends to improve throughout fiscal 2026.
Speaker Change: Positioning us to return to growth in fiscal 2027 and beyond.
Speaker Change: We are confident in our ability to grow Michael Kors, two 4 billion in revenue and Jimmy Choo to $800 million in revenue.
Speaker Change: While restoring operating margins.
Speaker Change: So the double digit range.
Speaker Change: Before I hand, the call over to Tom as many of you know he will be leaving Capri on June 20th.
Speaker Change: And this marks his final earnings call with us.
Speaker Change: I would like to express my deep appreciation for Tom's exceptional leadership and his many contributions over the past eight years.
Speaker Change: His impact as both CFO and COO has been significant and I am truly grateful for his partnership throughout his time at Capri Holdings.
Speaker Change: Thank you Tom.
Speaker Change: Now Tom will review, our fourth quarter results and guidance in more detail.
Tom Edwards: Thank you John and good morning, everyone.
Tom Edwards: With fourth quarter results total company revenue of $1 billion decreased 15% versus prior year slightly better than our expectations.
Tom Edwards: We reported an operating loss of $33 million slightly below our expectations.
Tom Edwards: Our net loss was $581 million, resulting in diluted loss per share of $4 90.
Tom Edwards: Primarily due to a noncash tax valuation allowance that I will discuss in more detail shortly.
Tom Edwards: Now turning to fourth quarter results in more detail.
Tom Edwards: Starting with revenue by channel.
Tom Edwards: Total company retail sales declined mid teens with e-commerce, performing slightly better than stores.
Tom Edwards: The impact of our store optimization program negatively impacted retail sales in the low single digit range.
Tom Edwards: In the wholesale channel revenue declined double digits due to overall softness in the channel as well as to our prior initiatives to reduce wholesale exposure.
Tom Edwards: Turning to revenue performance by geography.
Tom Edwards: In the Americas revenue decreased 13%.
Tom Edwards: Revenue in EMEA declined 14%.
Tom Edwards: Revenue in Asia decreased 23%.
Tom Edwards: Now looking at revenue performance by brand.
John Idol: Given the pending sale of Versace, beginning in fiscal 2026, we will reclassify versace as a discontinued operation, which means it will no longer be included in our non-GAAP results. Therefore, my comments will focus only on the Michael Kors and Jimmy Choo brands.
John Idol: At Michael Kors revenue decreased 16% compared to prior year global.
John Idol: Global retail sales decreased mid teens, while wholesale declined double digits.
John Idol: Excluding the impact of foreign currency and store closures retail sales declined at a similar rate in the fourth quarter versus the third quarter.
John Idol: By geography sales in the Americas decreased 12%.
John Idol: Revenue in EMEA declined 15%.
John Idol: Revenue in Asia decreased 31%.
John Idol: At Jimmy Choo revenue decreased 3% compared to prior year global retail sales declined high single digits and wholesale increased high teens.
John Idol: By geography total revenue in the Americas decreased 7%.
John Idol: Revenue in EMEA increased 9%, while revenue in Asia declined 16%.
John Idol: Now looking at total company margin performance.
John Idol: Gross margin of 61% declined 170 basis points to prior year.
John Idol: This was below our expectations, primarily due to actions taken during the quarter to ensure we enter the year in a more current inventory position.
John Idol: By brand Michael Kors gross margin of 58, 6% compared to 68% last year.
John Idol: The decline versus prior year was primarily driven by lower full price sell throughs on older styles.
John Idol: Notably AUR trends improved from high single digit declines in the third quarter to mid single digit declines in the fourth quarter.
John Idol: Driven by a sequential improvement in full price sell through trends on new styles.
John Idol: Jimmy Choo gross margin of 66, 2% compared to 71% last year.
John Idol: The decline versus prior year was primarily driven by the impact of inventory actions taken to enter fiscal 2026 in a better position as well as the effect of the April 'twenty 'twenty four acquisition of our second footwear factory.
John Idol: As a reminder, we acquired footwear factories to further align with the luxury industry best practices and to strengthen our technical competencies, while ensuring consistent future supply for Jimmy Choo.
John Idol: Approximately 50% of Jimmy Choo footwear is vertically integrated.
John Idol: Operating expense decreased $25 million the decline versus prior year was the result of our cost reduction program.
John Idol: These benefits were partially offset by higher variable costs and unfavorable foreign currency translation compared to our expectation.
John Idol: As a percentage of revenue operating expense was 64, 2% compared to 56, 3% last year.
John Idol: Primarily reflecting expense deleverage on lower revenue.
John Idol: Total company operating margin was negative three 2% compared to positive six 4% last year.
John Idol: By brand, Michael Kors operating margin of four 6% compared to 14, 1% last year.
John Idol: And Jimmy Choo operating margin of negative seven 5% compared to negative five 8% last year.
John Idol: Now I would like to discuss the tax valuation allowance in.
John Idol: In light of our recent results the future use of our deferred tax assets with reevaluate it and we recorded a noncash valuation allowance of $545 million.
John Idol: $119 million of which was related to versace.
John Idol: Dependant on our levels of profitability, we may be able to benefit from these deferred tax assets in the future.
John Idol: Taken together, our net loss was 581 million resulted in diluted earnings per share of negative $4.90.
John Idol: Now turning to our balance sheet looking at inventory, we ended the quarter with $869 million, a 1% increase versus prior year.
John Idol: We received $60 million worth of inventory earlier than anticipated.
John Idol: The early receipt of inventory will provide a benefit of mitigating the tariff impact in fiscal 2026.
John Idol: By the end of the fiscal year, we anticipate inventory levels will be down in the mid single digit range.
John Idol: We ended the quarter with cash of $166 million and debt of $1 5 billion, resulting in net debt of approximately $1 3 billion.
John Idol: This is higher than we originally anticipated due to the earlier timing of inventory receipts as well as the weaker U S dollar, which increased the dollar value of our euro denominated debt.
John Idol: Looking at our leverage ratio net debt to adjusted EBIT Dar was three two times at the end of fiscal 2025.
John Idol: Now turning to guidance.
John Idol: Compared to prior expectations, there have been a number of changes, including first the pending sale of Versace.
John Idol: The impact of tariffs and third foreign currency exchange rates.
John Idol: I would like to take a few minutes to discuss how each is impacting our guidance.
John Idol: Starting with the pending sale of Versace.
John Idol: Since we will reclassify the business as discontinued operations beginning in fiscal 2026, our guidance now excludes versace from our results.
John Idol: Additionally, upon completion of the sale, which we expect will occur in the second half of calendar 2025, we plan to use the proceeds to reduce debt. After doing so we anticipate we will have minimal net debt remaining on our balance sheet. As a result, we anticipate our interest expense will significantly decline.
John Idol: Turning to tariffs the situation remains highly dynamic, but we are proactively managing the risk and remain positioned to respond.
John Idol: Our sourcing is broadly diversified with the majority of Michael Kors fiscal 2026 production volume originating from Vietnam, Cambodia and Indonesia.
John Idol: Jimmy Choo sources, the vast majority of its products from Italy.
John Idol: For Michael Kors, and Jimmy Choo, combined China represents approximately 5% of U S production volume.
John Idol: We anticipate we will begin to see the impact of current tariff rates in our fiscal first quarter when shipments of affected products commence.
John Idol: As the year progresses, the impacts will increase.
John Idol: Assuming a 10% baseline tariff and a 30% tariff on imports from China.
John Idol: We estimate the impact of tariffs on products shipped into the United States would increase our cost of goods sold by approximately $60 million in fiscal 2026 on an unmitigated basis.
John Idol: Our global supply chain is highly agile supported by long standing relationships with our manufacturing partners.
John Idol: In fiscal 2026, we expect to begin to offset the impact of tariffs with the goal of fully mitigating their effect over time.
John Idol: Some of the actions. We are taking include sourcing optimization to minimize tariff exposure working with our sourcing partners to create cost efficiencies.
John Idol: And strategically evaluating select price increases.
John Idol: And finally looking at foreign currency given.
John Idol: Given the recent weakening of the U S. Dollar based on today's exchange rates foreign currency is now expected to modestly increase both revenue and operating expense dollars in fiscal 2026 compared to fiscal 2025.
John Idol: Due to the uncertainty around tariffs, including the potential impact on consumer spending as well as fluctuating foreign currency exchange rates, we are providing guidance assuming a range of outcomes.
John Idol: In fiscal 2026, we expect total company revenue to be between three three and $3 4 billion.
John Idol: By brand, we expect Michael Kors revenue between $2 75, and $2 85 billion.
John Idol: And Jimmy Choo revenue between $540 million and $550 million.
John Idol: As we think about the cadence of the year, we anticipate gradual progression as our strategic initiatives gain traction.
John Idol: For the year, we anticipate gross margin of approximately 61% to 61, 5%.
John Idol: Compared to a combined Michael Kors and Jimmy Choo gross margin of 62, 2% last year.
John Idol: We expect operating expense of approximately 2 billion, reflecting the removal of versace from our results as well as our cost reduction initiatives.
John Idol: As a reminder, our cost savings initiatives include store closures global head count reductions office consolidation and other efficiency measures across our supply chain and back office.
John Idol: Given the significant weakening of the U S. Dollar we now anticipate foreign currency will modestly increase operating expense dollars.
John Idol: We expect full year operating income in a range around $100 million.
John Idol: By brand, we anticipate Michael Kors operating margin in the high single digit range and Jimmy Choo operating margin in the negative mid single digit range.
John Idol: Turning to our expectations around certain non operating items.
John Idol: We expect net interest income between 85, and $90 million, reflecting minimal debt levels and lower interest expense in the back half of the year. After the completion of the sale of Versace.
John Idol: As well as interest income from our net investment hedges.
John Idol: We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately $119 million.
John Idol: As a result, we expect to generate diluted earnings per share between $1 20, and $1 40.
John Idol: Now turning to capital allocation as I mentioned, we plan to use the proceeds from the sale of Versace to reduce debt going forward as we think about allocating our cash flow. Our first priority is to invest in the business.
John Idol: This includes store renovations.
John Idol: As our retail locations are one of the cornerstones to rebuilding sales growth.
John Idol: As discussed during our Investor day, we plan to renovate approximately 50% of the Michael Kors store fleet over the next three years.
John Idol: We anticipate these renovations will cost approximately $350 million over the three year period.
John Idol: It will be included in our store optimization program.
John Idol: Our second priority is to maintain a strong balance sheet.
John Idol: And our third priority is to return cash to shareholders via share repurchases.
John Idol: Over time, we anticipate resuming share repurchases to create additional shareholder value.
John Idol: In terms of capital expenditures, we anticipate spending approximately $110 million in fiscal 'twenty six.
John Idol: Which includes Michael Kors, and Jimmy Choo store renovations as well as expenditures, including investments in our digital and analytical capabilities.
John Idol: Now turning to first quarter guidance, we expect total company revenue to be between 765% and $780 million.
John Idol: By brand, we anticipate Michael Kors revenue between 615 and $625 million.
John Idol: And Jimmy Choo revenue of approximately $150 million to $155 million.
John Idol: Looking at operating margin, we expect first quarter operating margin will be approximately breakeven.
John Idol: In terms of operating margin by brand, we anticipate Michael Kors operating margin in the mid single digit range and Jimmy Choo operating margin of approximately breakeven.
John Idol: Turning to our expectations around certain nonoperating items, we expect first quarter net interest income of approximately $15 million, reflecting interest income from our net investment hedges.
John Idol: We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately $119 million.
John Idol: As a result, we expect to generate diluted earnings per share of approximately 10 to 15.
John Idol: In closing as we enter fiscal 2026, we are encouraged by early signs that validate the effectiveness of our strategic initiatives and reinforce our confidence in our path forward.
John Idol: We expect underlying trends to continue improving through fiscal 2026.
John Idol: Looking to fiscal 2027 and beyond with our strategic initiatives, gaining traction we expect to return to revenue growth and margin expansion.
Speaker Change: Now on a personal note as this marks my final earnings call at Capri Holdings, I would like to take a moment to thank John for his support and partnership it has been a privilege to work together.
John Idol: And I would like to thank the board of directors.
John Idol: Our leadership team and all of our dedicated colleagues for your collaboration support and shared commitment over these past eight years.
John Idol: With the strength of Michael Kors, and Jimmy Choo, I am confident that under your leadership Capri Holdings is well positioned to deliver sustained revenue and earnings growth as well as increased shareholder value in the future.
John Idol: Now we will open up the line for questions.
John Idol: Thank you we will now be conducting a question and answer session.
John Idol: I'd like to ask a question. Please press star one on your telephone keypad.
John Idol: A confirmation tone will indicate your line is in the question queue.
John Idol: May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
John Idol: I ask that you please limit yourself to one question one.
John Idol: One moment. Please for your first question.
Speaker Change: Our first question comes from the line of Simeon Siegel with BMO capital markets. Please proceed with your question.
Speaker Change: Thanks, Hey, guys. Good morning, Tom It's been great working with you best of luck on your next chapter.
Speaker Change: Thank you Simeon.
Speaker Change: So great to see the slight revenue raised at Michael Kors and the discussion around returning to growth in 'twenty seven I guess on the other hand, the margins look lower so can you guys speak to a little bit what gives you comfort in the trough in revenue expectations, and then maybe a little bit more color on the drivers you're baking into the margin degradation I guess, especially in light of what looks like healthier full price sell through.
Speaker Change: Hey, good morning, Simeon I'll I'll take the revenue part I'll pass the gross margin part out to Tom because I think there's a little more color to that in terms of its.
Speaker Change: Actual T y L y and how the tariffs.
Speaker Change: Tariffs are impacting that.
Speaker Change: Number one on the revenue side.
Speaker Change: We are.
Speaker Change: Optimistic.
Speaker Change: Given what we see happening right now for us in Q1.
Speaker Change: We are two months into the quarter.
Speaker Change: And the first number I will give you is we were down approximately 15% comp.
Speaker Change: In REIT in Michael Kors.
Speaker Change: Retail.
Speaker Change: Last quarter, and we are almost flat at this point. So there has been a significant step change.
Speaker Change: In the performance of our Michael Kors.
Speaker Change: At at retail led by our full price business.
Speaker Change: Really nice to see because we have three groups that we talked about in the.
Speaker Change: Our prepared remarks, that's Layla Nolita Bryant and then a further one called Dakota, all of which are are having excellent full price sell throughs.
Speaker Change: And they're all in the 200 to three.
Speaker Change: 300 and I'm.
Speaker Change: I'm sorry.
Speaker Change: 200 to $400 range. So those are back to our historical.
Speaker Change: Kind of price ranges, where we did where we were very successful in the past.
Speaker Change: And between the great work that Michael and the design teams have done a as well as the great price value relationship that's been put into the product.
Speaker Change: We're seeing very very strong green shoots.
Speaker Change: I should also mention that our jet set storytelling.
Speaker Change: Which is around traveling the world and style is really resonating with the consumers.
Speaker Change: And we're seeing that in some of the existing data analytics in terms of the sales and the consumers that are shopping with us as well as some of the forward looking analysis that we've done with consumers on intent to purchase.
Speaker Change: And that has gone up again sequentially very significantly.
Speaker Change: So we believe at least initially.
Speaker Change: That we're seeing are results from the changes that we started to implement.
Speaker Change: Really in the beginning of the fourth quarter. So it's nice to see that happening.
Speaker Change: We've got more work to do in particular in the outlet channel to bring some of that.
Speaker Change: Excitement level to that channel.
Speaker Change: And we're going to be doing that starting in the back half of the year.
Speaker Change: So that's what gives us some good feeling about where the revenue projections are that we've just given you as well as how we see a step change into next year I would like to also add that we will be through most of the store closure program.
Speaker Change: Got about 75 stores to close this year.
Speaker Change: Predominantly those will be Michael Kors.
Speaker Change: And that would have about a 50 plus million revenue impact that we will not have to anniversary next year.
Speaker Change: And Additionally, we will have about another $50 million in wholesale door closures.
Speaker Change: That were planned by us that again that program really ends at the end of this fall season. So we'll really be looking at comp doors, so that's almost $100 million impact.
Speaker Change: But we won't be anniversarying.
Speaker Change: Anniversary next year, So I think that's.
Speaker Change: Between between our our storytelling around around our heritage jet set.
Speaker Change: Or is it really the kind of the core of this company.
Speaker Change: One number to the product.
Speaker Change: And our standout style with compelling value.
Speaker Change: Number three the store closure program will be behind US and then on a very positive and exciting note as well.
Speaker Change: We're going to begin we've already started.
Speaker Change: Our store renovation program, where we're going to renovate about 50% of our fleet over the next three years and we think that's also going to have a significant impact.
Speaker Change: An inflection on our store productivity. So we're feeling very confident around what we see happening at Michael Kors.
Speaker Change: Regarding Jimmy Choo.
Speaker Change: I think we know we have some issues around the dress shoe.
Speaker Change: A category, we've seen ups and downs there came out of Covid. It was very strong and things went back to casual again more from a fashion styling standpoint.
Speaker Change: We are doing a better job with cash casual, but we think we can do even.
Speaker Change: And do even more in that category.
Speaker Change: Which obviously is our core category, but we're very excited about the announcement that we made about the three new groups coming for fall season, and accessories. We think we've got a very big opportunity as we are in the luxury consumers closet already.
Speaker Change: To be able to take our accessories and put them more compelling price points in particular for the aspirational luxury consumer and we think that's a big opportunity for US I think we've said.
Speaker Change: That we are very engaged with Jimmy Choo, and we think that the brand has great opportunity to grow and develop so that's what gives us.
Speaker Change: A positive outlook on revenues in particular for 27% and 28, but let me stop there and I'll turn it over to Tom for the discussion around our gross margins sure and semi on gross margins. There are a couple of points here. The first is just to kind of remind back on our prior guidance.
Tom Edwards: We're improving gross margin for the year based on the strategic initiatives for Jimmy Choo, and Michael Kors getting the right inventory into place and do everything that we are planning and are doing to drive the brand and that we are seeing the first real results in green shoots here in the first quarter.
Speaker Change: With that increase in those initiatives that all still is in place and we still feel very good about that what is happening now is there is an overlay for the tariff impact in fiscal 'twenty and that as I noted in the prepared remarks was about $60 million higher costs on an unmitigated basis.
Speaker Change: And if I just do the math between our prior expectations up 50 bps.
Speaker Change: That tariff amount is about a down 150, plus so we get to the midpoint down 100 bps.
Speaker Change: Basis points for gross margin for the year and that is before we really.
Speaker Change: Get the traction on the mitigation activities. Our goal is to fully mitigate over time, the tariff impact we're looking at sourcing optimization.
Speaker Change: We're looking and working with our sourcing partners to create cost efficiencies and we will be strategically evaluating selected price increases so as we move through the year, we'll get more visibility on that but our first priority and all of that is to maintain the momentum of our brand.
Speaker Change: Recovery and we'll be doing that as we strategically and very carefully assess our reactions, particularly on the pricing front.
Speaker Change: Great.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.
Brooke Roach: Good morning, and thank you for taking our question. It sounds like you have a lot of emerging momentum at Michael Kors retail I was hoping you could discuss the wholesale outlook for the brand. This year, how will your partner discussions going today versus your expectations at Investor Day, a few months ago, particularly in the North America business. Thank you.
John Idol: Thank you and good morning Brook.
Speaker Change: I would say, it's just about where we presented to you.
Speaker Change: At our Investor day.
Speaker Change: We've been around the world, we've met with all of our our strategic wholesale partners.
Speaker Change: And I would say the and this is on Michael Kors.
Speaker Change: I'd say the.
Speaker Change: Response has been has been very consistent.
Speaker Change: In that number one people are are very much feeling positive about us returning to the focus around our jet set heritage.
Speaker Change: I liked the new storytelling the way it's been developed around hotel stories.
Speaker Change: In traveling.
Speaker Change: Where we have a much uh huh.
Speaker Change: A group of Influencers associated with the Michael Kors brand I would say that's also caused a significant inflection in our cars.
Speaker Change: That I've mentioned before Layla nolita.
Speaker Change: Bryant and Dakota, all seeing very strong sell throughs on a global basis.
Speaker Change: So so we're seeing positive response from those partners.
Speaker Change: In certain cases, they've actually gone back and re looked at there are commitments to us and increase those commitments.
Speaker Change: I would also say that we I think you are probably aware, we launched on Amazon recently.
Speaker Change: That has been very very successful and it has exceeded our expectations.
Speaker Change: And it's and it's.
Speaker Change: Also showing the ability to communicate with a broader customer group, who is a high level of engagement with us.
Speaker Change: In our full price selling on that platform has been excellent.
Speaker Change: So so it's a little hard to see how that's going to all come together when I talk about wholesale because we do as I mentioned before we still have some additional store closures that will happen.
Speaker Change: Throughout the fall season, most of it will come to come to an end in September October November.
Speaker Change: So I think the kind of the true.
Speaker Change: Our measurement, we will start to see <unk>.
Speaker Change: Fourth quarter calendar fourth quarter, and then into into <unk>.
Speaker Change: Spring of next year. So we do have a have a decline planned for wholesale.
Speaker Change: But as I've said again in my prepared remarks, our goal and our belief is that we will stabilize that part of our business and actually see some modest growth.
Speaker Change: Especially in years.
Speaker Change: In fiscal year, 2007 and 28.
Speaker Change: Great. Thanks, so much I'll pass it on.
Speaker Change: Thank you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed with your question.
Speaker Change: Hi, This is Katie on for Oliver One thing we wanted to talk about and ask is just on sort of what's within your control to help drive traffic and conversion and the strong trends that you're currently seeing in their own retail channel.
Speaker Change: In just a more volatile consumer backdrop that we're seeing thank you.
Speaker Change: Yes.
Speaker Change: Good morning, I think we're very focused on <unk>.
Speaker Change: Traffic as we talked about before.
Speaker Change: We're seeing a lot of positive indicators are full priced AUR has turned positive to see that happen.
Speaker Change: Really in a quarter is quite extraordinary and we're very pleased with that.
Speaker Change: We have not seen traffic turned positive and I'll say, that's more of a North America and China issue. We've got some very nice trends going in Europe for us.
Speaker Change: But the sequential declines have have decelerated significantly.
Speaker Change: <unk>.
Speaker Change: And again at full price were almost close to positive traffic.
Speaker Change: There is well well we're focused on is really our marketing initiatives and our storytelling.
Speaker Change: Along with that.
Speaker Change: We've spent a lot of time and money and have the resources around our data analytics to really give us the tools to be able to engage with new and existing consumers to excite them about the brand and to reengage with them or to drive them into our stores.
Speaker Change: And we're seeing positive results around that initiative and as I just mentioned also around.
Speaker Change: The significantly increased influencer programs.
Speaker Change: That we have going on and Youre going to see a lot more of that particular around the hotel stories.
Speaker Change: That are really just starting to launch around the globe.
Speaker Change: So I think while we cannot be 100% control traffic I think we can influence it and we feel that we have.
Speaker Change: So the strategies and many tools within our control.
Speaker Change: To be able to.
Speaker Change: To try to move that forward and of course, you are having greater brand desirability also referred to as brand heat.
Speaker Change: Will help to drive that.
Speaker Change: As well.
Speaker Change: Through our stores.
Speaker Change: Conversion has always been something that even through all of our ups and downs.
Speaker Change: We've had very strong conversion rates at Michael Kors, So once they come in the door.
Speaker Change: Converting with our customers has been less the issue for us its been more footfall, which obviously goes back to brand desirability, which goes back to brand heat et cetera, and I don't want to say that we call the bottom.
Speaker Change: But we've definitely seen a change in Michael Kors, and it's nice to see that.
Speaker Change: In such a short window of time, we've got a long way to go to two to.
Speaker Change: Rebuild this business to the $4 billion.
Speaker Change: That were that were aspiring to get to.
Speaker Change: But again, we are beginning to see the results of our initiatives.
Speaker Change: We're quite hopeful.
Speaker Change: Given the results.
Speaker Change: Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Our next question comes from the line of Jay sole with UBS. Please proceed with your question.
Speaker Change: Great. Thank you so much John I'm, just wondering if you can elaborate a little bit more on some of the strategies and things that you want to do to improve the sales trajectory of the Michael Kors brand I mean, you talked about initiatives when it comes to product and marketing in store experience and then you mentioned the pricing that some of the newer bags are selling for us within that traditional area, where you've had a lot of success, but if you look back over.
Speaker Change: The history of the brand and some of them once you've had a lot of momentum so I'm, probably less momentum than you bought it what are some of the core things that like you know work consistently to drive the brand for that maybe had fallen away a little bit in the last couple of years that you can get back to to get to that positive sales growth rate on a sustainable basis that you know you can do thank you.
Speaker Change: Thank you Jay and good morning.
Speaker Change: I think we've talked about this in the past.
Speaker Change: We clearly have made missteps.
Speaker Change: Over the past few years.
Speaker Change: Ill go back into some.
Speaker Change: Some of the causes of that and some of them were self inflicted et cetera.
Speaker Change: But I think what happened is in November December we got clarity in this company of about.
Speaker Change: This business was built by Michael originally.
Speaker Change: Some 40 plus years ago, and he really had a vision.
Speaker Change: For the way our consumer wanted to wanted to look and an exciting lifestyle that they wanted to live and.
Speaker Change: And that's still a very relevant positioning and.
Speaker Change: We I think lost our way and decided at various points in time that that either wasn't the right thing for us or or there were other trends happening that maybe we're more exciting.
Speaker Change: And what again, our consumer research really told US was the customer likes our positioning and they really yes. They wanted to maybe a little more modern and certain products need to be a bit more relevant but.
Speaker Change: When you build a brand over over that period of time to try to either completely.
Speaker Change: Reset it or to run away from your history.
Speaker Change: <unk> worked the right things for us to do so I think that.
Speaker Change: We look at that as the first starting point and the entire management team and all of our store managers are excited our retail partners are excited so we think we're onto something when it when it comes to that.
Speaker Change: Secondly, we had aspirations of elevating the brand.
Speaker Change: And while that worked at certain moments certainly coming out of Covid, we raised prices considerably it worked for a while.
Speaker Change: But then the customer came back and said.
Speaker Change: That's not exactly what we expect from Michael Kors theirs.
Speaker Change: Window of pricing that we enjoy are consuming your products and we'd really like you to stay there and so once we finally acknowledged that that's what the consumer has voted and said.
Speaker Change: You can see the results are already starting in even though again in my prepared remarks I said.
Speaker Change: We're working on our footwear and ready to wear businesses to get that same level of product reception actually in ready to wear were starting to see it.
Speaker Change: Very very quickly as well where.
Speaker Change: Where the customer has leaned into some of our very important.
Speaker Change: Important key styles that we have been marketing and the sell throughs are very very high sell throughs, we haven't seen in three or four years.
Speaker Change: Again, I think that.
Speaker Change: You have to learn from your mistakes if to be honest with yourself about what those mistakes were.
Speaker Change: I believe we are doing both of those things today.
Speaker Change: And then we're going to stay much more focused much more committed to two.
Speaker Change: I think our brand positioning.
Speaker Change: Very important in other brands, who we compete with will have their positioning and we should stay in our lane and tried to be true to ourselves.
Speaker Change: I'd also say similar.
Speaker Change: Jimmy Choo with the exception Jimmy Choo as glamour, it's playful, it's it's really got an exciting DNA and consumers Love Jimmy Choo, you don't you don't find consumers, saying anything negative or <unk> gone off brand et cetera.
Speaker Change: But what we do have to do with Jimmy Choo as we have to expand the use.
Speaker Change: For the consumer.
Speaker Change: Because she loves the brand, but she associates it very very much with with a more dressed up.
Speaker Change: In a more formal and a more occasion.
Speaker Change: Vicki.
Speaker Change: Vision of what the brand is and we've got to do a better job of bringing her the other parts of how Jimmy Choo can be a part of her lifestyle.
Speaker Change: And one of those areas is casual footwear and the other area quite frankly, which we were off to a very good start we got distracted.
Speaker Change: And we're more reengage and refocus is unacceptable.
Speaker Change: Then she comes into our store she is willing to spend very large amounts of money on footwear.
Speaker Change: And now to be able to say, yes, we will still have our great since bag and our diamond backs, which will retail and the <unk> hundred 2500 range or bond bonds that will be 3000 and higher.
Speaker Change: But to have this other range of product, which is still very expensive.
Speaker Change: Be able to have that not only in our own stores, but also on our wholesale distribution basis in the best luxury stores in the world is going to give Jimmy Choo I think another leg to be able to drive to.
Speaker Change: And so again, we just have laid out this additional strategy since we met with you at Investor Day.
Speaker Change: And so we're excited about where Jimmy Choo can go we've got a store fleet located in the best locations in the World The best Streets Best cities sitting.
Speaker Change: Sitting next to the best retailers in the World and we should be able to capitalize on the brand.
Speaker Change: And its and its recognition as well as the fact that we've got customers who come in who are ready to shop, and we should be there with them.
Speaker Change: With them for the right with the right products. So thanks, a lot Jack.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Felicia.
Felicia Sherman: Sherman with Bernstein. Please proceed with your question.
Felicia Sherman: Thank you so much my question is around your pricing strategy.
Speaker Change: You've talked a few times now including on this call about the need to offer better value price points to the consumer and Youre seeing some success. There when do you expect to be at steady state there on where you want to be on pricing and then you also made a comment I think Tom earlier on strategically evaluating price increases to mitigate some of that tariff risk.
Speaker Change: You talk about how that fits into your broader broader pricing strategy and could there be some risk around blurring the positioning of the brand there. Thank you.
Speaker Change: So first of all good morning, Lisa.
Speaker Change: Number one we should be where we need to be by the fall season.
Felicia Sherman: With the Michael Kors brand were.
Felicia Sherman: Im guessing right now, but lets say were $60 or 70% of the way now we made a lot of changes quickly that also impacted some of our margin as well.
Felicia Sherman: Lowered certain prices because we knew it was the right place to be.
Felicia Sherman: And by the way those are historical prices. So I want to be very clear that we're not going to levels that were.
Felicia Sherman: We haven't been before.
Felicia Sherman: So.
Felicia Sherman: That put a little pressure on us on margin, we will see a bit of that.
Felicia Sherman: In first quarter as well as we slowly start to work with our supply base et cetera on some of those changes that we needed to make.
Felicia Sherman: We should be in a very good place by by the fall season.
Felicia Sherman: I might also say to you that.
Felicia Sherman: Conversely, also one of the things thats going to impact AUR.
Felicia Sherman: In our outlet channel, we've actually raised some prices.
Felicia Sherman: We found that some of our pricing was was.
Felicia Sherman: Not commensurate with what we think the brand offered as value nothing nothing.
Felicia Sherman: Overly significant but enough that will hopefully help us.
Felicia Sherman: <unk> our margins on a go forward basis.
Felicia Sherman: But also help us raise our AUR and selling well.
Felicia Sherman: We're also.
Felicia Sherman: In particular in our outlet channel.
Felicia Sherman: We are reducing.
Felicia Sherman: A significant level of promotional activity.
Felicia Sherman: And that is actually that started already in the fourth quarter.
Felicia Sherman: That did impact some of our revenues in that channel, but thats, what we wanted to do we thought that was the right.
Felicia Sherman: Thing for us to do.
Felicia Sherman: So again, there's a little bit of puts and takes here.
Felicia Sherman: And.
Felicia Sherman: Ill turn it before I turn it over to Tom and second I think the pricing increases as it relates to mitigating tariffs.
Tom Edwards: I think we're going to go slowly around that I think we want to first and foremost get the Michael Kors brand.
Felicia Sherman: Back on track.
Felicia Sherman: Moving forward re engaging with that consumer so that they're having a great experience with us.
Felicia Sherman: And how and where we need to tweak I will call. It tweaking prices theres not going to be any significant price changes.
Felicia Sherman: It will also depend on how much we're looking to to to do after we get done working with all of our suppliers.
Felicia Sherman: On mitigating some of these tariffs and I think lastly, we need to also determine where the tariffs are because none of us actually sit here today and we've given you a range in our guidance.
Felicia Sherman: We're all sitting here.
Felicia Sherman: As everyone is waiting to find out what.
Felicia Sherman: <unk> is happening and I think we'll know more of that towards the tail end of the summer.
Felicia Sherman: So we can have a better understanding of what in fact, we are going to need to mitigate and so that would also kind of get into.
Felicia Sherman: There, we would take price increases or not but I wanted to be clear. The first thing that we want to do is to make sure that we have an exciting.
Felicia Sherman: Experience with the consumer and again, if we can drive more revenues.
Felicia Sherman: That will increase our profitability you can see that the leverage that just by having.
Felicia Sherman: A small mid single digit increase in fiscal 2017 and in fiscal 'twenty eight.
Felicia Sherman: We will bring to us is quite significant.
Felicia Sherman: And we will have a very very big EPS impact.
Felicia Sherman: As well as when you layer on top of that.
Felicia Sherman: If we do restart the share repurchase program I think youre going to see quite a significant lift.
Felicia Sherman: And EPS for the company.
Felicia Sherman: In a relatively short period of time, let me stop there and turn it over to Tom on the pricing piece.
Tom Edwards: Thank you Jonathan and Lisa I, just wanted to reiterate what John said, our first priority is really brand momentum that is the primary goal and its the primary really basis for future success. So we will proceed extremely carefully on assessing any pricing actions.
Speaker Change: Ultimate tariff levels are better known we'll certainly assess market reaction and look at this on a very granular basis, but our efforts now are really focused on the sourcing side.
Speaker Change: Working with our sourcing partners and sourcing optimization.
Tom Edwards: Very helpful. Thank you everyone for joining.
Felicia Sherman: Thank you and thank you everyone for joining us today I'd like to remind everyone before we conclude the call.
Felicia Sherman: That we are.
Speaker Change: Awaiting approval from various jurisdictions around the world on the Versace transaction.
Felicia Sherman: We are very.
Felicia Sherman: Very optimistic that that transaction will be completed.
Felicia Sherman: Some time in the <unk> in the fall season.
Felicia Sherman: And as a result of that the company will have very very low net debt, which puts us in a very strong position to be able to invest in the future of both Michael Kors and Jimmy Choo.
Felicia Sherman: And Additionally has a very strong EPS impact for the company as our carryforward interest will go down significantly.
Felicia Sherman: So we're very pleased about the results of that transaction and are hopeful that it will conclude in the fall season, which will set us up for another very positive.
Felicia Sherman: Positioning for Capri holdings. Thank you for joining us today and look forward to updating you on our next call.
Felicia Sherman: Thank you. This does conclude today's conference. We appreciate your participation you may disconnect your lines at this time.
Felicia Sherman: Enjoy the rest of your day.
Felicia Sherman: [music].
Felicia Sherman: Okay.
Felicia Sherman: [music].