Capri Holdings Ltd. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• Revenue and Earnings: Fiscal 2023 revenue increased high single digits and earnings per share increased mid-single digits on a 52-week constant currency basis. Revenue grew across all houses, with double-digit growth at Versace and Jimmy Choo, and mid-single digit at Michael Kors.
• Product Performance: Accelerated growth in accessories across all houses; women's accessories saw over 40% growth at Versace, over 20% at Jimmy Choo, and low single digits at Michael Kors. Footwear grew in low double-digits at Versace and Michael Kors, and high single digits at Jimmy Choo.
• Database Growth: Added 12.6 million new names to the database, an 18% increase, the largest year-over-year increase in company history.
• Share Repurchases: Returned $1.35 billion to shareholders through share repurchases.
• Brand Initiatives: Versace focused on positioning as a leading luxury leather house, Jimmy Choo on expanding accessories and capitalizing on glamour, and Michael Kors on reinvigorating Jet Set storytelling and growing e-commerce and store productivity.

Segment Performance

• Versace: Fiscal 2023 revenue exceeded $1.1 billion, with double-digit constant currency growth. Fourth quarter revenue decreased 9%. Global retail sales increased in the low single digits, but wholesale declined in the Americas. EMEA revenue increased in the low single digits, and Asia revenue grew in the mid-single digits. Accessories saw over 40% retail sales growth, footwear low double-digit growth in women's, and fragrance, eyewear, and jewellery saw strong double-digit growth.
• Jimmy Choo: Fiscal 2023 revenue reached $633 million, with 13% constant currency growth. Fourth quarter revenue increased 6%. Global retail sales grew in the low single digits. Americas revenue slightly declined, EMEA revenue increased in the low 20% range, and Asia revenue had mid-single digit decline but sequential improvement. Accessories were the strongest performing category with over 20% retail sales growth, footwear grew driven by occasion and sneakers, and fragrance, eyewear, and jewellery saw growth.
• Michael Kors: Fiscal 2023 revenue was $3.9 billion, with 4% constant currency growth. Fourth quarter revenue decreased 2%. Global retail sales grew in the low single digits, but wholesale declined in the back half of fiscal 2023. Americas sales declined in the high single digits, EMEA revenue increased in the low single digits, and Asia revenue grew in the mid-teens. Accessories saw low single-digit global retail sales growth, footwear had double-digit retail sales growth, men's was the strongest performing category in retail with strong double-digit growth, and licensing revenue declined.

Guidance

• Fiscal 2024: Anticipates revenue to increase low single digits and EPS to increase mid-single digits. Focus on growing e-commerce, increasing store productivity through clienteling and renovations, and leveraging databases. Brand-specific initiatives include Versace aiming for $2 billion revenue, Jimmy Choo aiming for $1 billion revenue, and Michael Kors aiming for $5 billion revenue.
• First Quarter 2024: Expect total company revenue of approximately $1.2 billion, a ~12% Y/Y decline. Own retail channel revenue expected to decline mid-single digits, wholesale channel revenue down ~30%. Operating margin expected to be ~8.5% compared to prior year's 18.5%.
• Half-Year Outlook: First half revenue expected to decline mid-single digits, second half revenue expected to increase high single digits. First half operating margin expected ~13%, second half ~19.5%.

Risks

• Americas Uncertainties: Near-term uncertainties in the Americas, with consumer spending softening and wholesale declines.
• Macroeconomic Challenges: Macro environment affecting wholesale sales, including lapping strong sell-ins from prior year and cautious partner planning.
• Consumer Spending: Soft consumer trends in some regions impacting retail sales.

Question and Answer

• **Q: Elaborate on near-term uncertainties in the Americas and retail channel improvement confidence?

A: John Idol discussed soft consumer spending in North America, lapping strong comparables, ramping up sales associates in department stores for fall, and reinvigorating brand positioning like Jet Set for Michael Kors.

• **Q: Outlook on Kors, Versace revisions and gross margin?

A: Tom Edwards mentioned revenue changes driven by FX and North America trends. John Idol detailed Versace's Men's business adjustments, inventory cleanup, and accessories/footwear growth. Gross margin expected to expand in second half with expense leverage.

• **Q: Cost structure alignment and margin improvement?

A: Tom Edwards talked about reducing back-office expenses, focusing on non-revenue driving costs, and continuing marketing/e-commerce investments. John Idol discussed Versace's Men's business recalibration and Michael Kors' hardware program improvements.

• **Q: Wholesale sell-in vs sell-through and brand improvements?

A: John Idol discussed inventory management, brand activations, and product adjustments. Versace's accessories/footwear success, Jimmy Choo's glamour focus, and Michael Kors' Jet Set storytelling were highlighted.

• **Q: Marketing AUR, debt levels, and share repurchases?

A: John Idol discussed AURs in brands, Tom Edwards talked about manageable debt levels and share repurchases aligned with free cash flow. Full-year share count guided above Q1 due to employee compensation issuance.

• **Q: Pricing, promotions, and consumer sensitivity?

A: John Idol addressed department store pricing dynamics, tiered pricing strategies, and balanced promotional environments to protect brand health.

• **Q: Americas store profile, remodels, and CapEx?

A: John Idol discussed store closures, renovations, and upsizing shoe spaces. Tom Edwards mentioned CapEx guidance and long-term store investment plans.

• **Q: Quantify peak to trough wholesale revenues and wholesale stabilization?

A: John Idol talked about stabilizing wholesale business, clienteling improvements using data analytics, and focusing on direct-to-consumer growth through e-commerce and store productivity.