Capri Holdings Limited

Greetings. Welcome to Capri Holding Limited first quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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.

Good morning, everyone, and thank you for joining us on Capri Holdings Limited's first quarter fiscal 2022 conference call. With me this morning are Chairman and Chief Executive Officer John Idle and Chief Financial Officer and Chief Operating Officer Tom Edwards. 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. 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. Investors should not assume that these statements made during this call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. In addition, certain financial information discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain costs associated with COVID-19-related charges, ERP implementation costs, CAPRI transformation costs, restructuring, and other charges. Unless otherwise noted, all financial information on today's call will be presented on a non-GAAP basis. To view the corresponding GAAP measures and related reconciliation, please view the earnings release posted to our website earlier today at capriholdings.com. I would also like to note that we have accompanying slides posted on our website. Now I would like to turn the call over to Mr. John Eidel, Chairman and Chief Executive Officer.

Thank you, Jennifer, and good morning, everyone. Last month, we shared Capri Holdings growth strategies and long-term outlook during our investor day. The initiatives that supported our growth opportunities centered around five strategic pillars, which are being executed at Versace, Jimmy Choo, and Michael Kors. These pillars form the foundation that position Capri Holdings to deliver multiple years of strong revenue and earnings growth. I would like to take a moment now to review our five strategic pillars. First, we plan to maximize the full potential of our three distinct fashion luxury houses. While each brand is unique with its own heritage, they all have consistent philosophies of fashion leadership and luxury. Second, we will create the most innovative and exciting fashion luxury product led by the design visions of Donatello Versace, Sandra Choi, and Michael Kors. Third, we will create compelling community engagement with each of our luxury houses. Fourth, we will leverage our seamless omnichannel capabilities to accelerate revenue growth. And fifth, we will build upon our corporate values with communities both internally and externally. We are already successfully executing against these strategies and are encouraged by our progress. Now turning to first quarter performance, we were pleased that revenue, gross margin, operating margin, and earnings per share all significantly exceeded our expectation. These results were driven by strength across all three of our luxury houses as they continued to deepen consumer desire and engagement, adding 10 million new consumers to their databases. Total revenue in the first quarter increased 178%, reflecting robust growth across all channels and regions. Additionally, gross margin expanded 90 basis points and operating margin reached 20.8%, both meaningfully better than anticipated. As a result, earnings per share of $1.42 was well ahead of our expectations. Moving to first quarter performance by brand. Starting with Versace, we were pleased with results which were materially ahead of our expectations. Revenue increased 158% in the first quarter, demonstrating the strength of the brand and the success of our strategic growth initiatives. All categories performed well as Versace's bold and fearless designs were positively received by consumers. In women's accessories, we saw continued improvement with sales more than double prior year. Consumer response to the La Medusa and Virtuous collections was strong. Overall, we are excited with the traction in accessories and the category is growing much faster than we anticipated. We are confident in our ability to position Versace as a leading luxury leather house and expand accessories revenue to $1 billion over time. Footwear also delivered strong performance with sales more than doubling prior year levels. In April, we introduced our new Greco sneaker for men and women, which features the iconic Greek key powder. the consumer response to this new addition in our active family was positive. In women's dress footwear, Versace is expanding its authority as we execute on our initiative to build a core offering focused on iconic brand coats. Additionally, we saw strength across both men's and women's ready-to-wear. Seasonal offerings incorporated the Tresor de la Mer pattern, which was featured in the Versace Spring 2021 runway show. We also continue to expand our core lines, which incorporate iconic house codes to increase sales and broaden Versace's reach. Moving to brand awareness and consumer engagement. Versace continues to deepen consumer desire. The brand's summer campaign, La Vacanza, took the iconic, very Versace look to the Italian Riviera. The campaign showcased the crystal clear waters and blue skies of Liguria, featuring iconic fashion from the summer collection. We were very encouraged to see a return of in-person red carpet events during the quarter, a wonderful sign of recovery. and an opportunity for Versace to once again adorn the world's most famous celebrities. Versace's presence on the red carpet was extensive, addressing celebrities including Lily Aldridge, Hailey Bieber, Dua Lipa, Zendaya, Nick Jonas, Leslie Odom Jr., and Usher. In June, Versace launched a mini capsule in collaboration with Lady Gaga's Born This Way Foundation. The capsule included a re-edition of an Atelier Versace jacket that Lady Gaga wore on tour, as well as unisex t-shirts. The capsule sold out within hours, and a portion of the proceeds were donated to Lady Gaga's Born This Way Foundation. We are also thrilled to have global superstar Dua Lipa featured in our fall campaign, where she will introduce the new LaGreca collection. The pop culture icon has over 90 million followers on her social media accounts. Dua Lipa epitomizes the Versace brand with her impeccable style, fearless attitude, and universal appeal. These initiatives, among others, helped to drive a 24% year-over-year increase in Versace's global database. Overall, Versace's strong first quarter results speak to the strength of the brand and reinforce our confidence in the luxury house's long-term growth potential. Moving to Jimmy Choo. Results were well ahead of our expectations, with revenues increasing 178% as we are beginning to realize the benefits of our strategic growth initiatives. In accessories, sales showed robust growth as we continue to focus on our three key hero handbag families, Varenne, Madeline, and Bonbon. Sales of women's handbags increased over 150% in the first quarter. In footwear, we have seen strong signs of recovery in dress styles as people are returning to work, attending events, and enjoying special occasions. Our casual offerings represent a significant growth opportunity and continue to perform well in the quarter. Results were led by the success of our new sneaker introductions in Diamond Light and Diamond X-Strap. As we shared at our recent Investor Day, one of Jimmy Choo's strategic growth initiatives is its core collection. This permanent collection of accessories and footwear was launched at the end of June and is centered on three design pillars that represent Jimmy Choo's DNA. Crystal, Pearl, and JC Monogram. The core collection enables us to translate our brand codes across product categories and consumer communication to create a recognizable and authentic identity for Jimmy Choo. Additionally, growth in the core collection will enable us to expand gross margins over time. The initial reaction from consumers has been encouraging. In terms of brand awareness and consumer engagement, Jimmy Choo's Summer 2021 campaign features our beach capsule collection and celebrates the summer holidays with laid-back glamour. To launch the beach collection, Jimmy Choo hosted 10 influencers in Sanya, China for a social media activation event using the hashtag ChooTravels. The activations generated over 14 million views on Weibo. Jimmy Choo had a strong showing on the red carpet. Celebrities wearing Jimmy Choo included Beyonce, Viola Davis, Laura Dern, Lizzo, Reese Witherspoon, and Zendaya. With the return of weddings, Jimmy Choo has enjoyed unique success and user-generated content on social media, specifically in the bridal sector. The I Do and Choo hashtag is a top-trending bridal hashtag on Instagram. In June, Jimmy Choo collaborated with Billy Porter to create a capsule to coincide with Pride. To mark the collection's release, Jimmy Choo donated a portion of the proceeds to support the Trevor Project, whose mission is ending LGBTIQ youth suicide. Our glamorous product and engaging marketing helped contribute to a 14% year-over-year increase in Jimmy Choo's global consumer database. Overall, we're optimistic about Jimmy Choo's future growth opportunities. We have the key building blocks to expand our assortments to meet all of our consumers' needs every day, anytime, anywhere, from formal to casual, across accessories and footwear. Now turning to Michael Kors. Our first quarter performance was better than anticipated, with revenues increasing 184%. compared to prior year, reflecting broad-based strength. We continue to increase signature penetration across all product categories by expanding our offering and developing new designs. Overall, signature represented 36% of the assortment compared to 30% last year, helping support higher gross margins and AURs. With our signature strategy, we continue to create desire as our iconic Michael Kors branding resonated with consumers. Now moving to accessories. Revenue in our retail channel increased triple digits globally as consumers responded to the fresh updates that continue to energize our signature styles. In footwear, casual performed well as we excited consumers with laid-back yet luxe styles offering iconic Michael Kors branding. Consumers also responded positively to Kors styles updated in Signature. Looking at women's ready-to-wear, we saw strong results in MTAGO, which capitalized on our consumers' active lifestyles. Turning to men's, first quarter sales increased over 300% driven by accessories. The men's business remains one of our fastest growing categories at Michael Kors. In watches and jewelry, we continue to see strong performance. Revenue in watches was driven by traditional styles that are true to our DNA with bold, sophisticated, and distinctive designs. In jewelry, we have seen a positive consumer response to our elevated assortment focused on sterling silver, precious metal platings, and semi-precious stones. In terms of brand awareness and consumer engagement, we continued our highly successful, the I Must Travel campaign, which reflects Michael's love of travel and our consumers' jet-set lifestyle. For summer, the campaign again featured quintessential jet-setter Bella Hadid and was filled with color, sun, and sea, which are also trademarks of the Michael Kors jet-set lifestyle. Michael Kors drove strong consumer engagement across social media platforms in the first quarter. we used influencers to create local relevance and generate global buzz around the launch of our new Bradshaw accessories collection. These influencers generated more than 153 million impressions across the social media platforms. In June, we activated our campaign around Pride, celebrating Michael's lifelong support of the LGBTIQ community. we launched a dedicated Pride capsule that featured a rainbow wave pattern and heart logo. A portion of the profits were donated to Outright Action International, which works to advance human rights for the LGBTIQ community globally. In China, Michael Kors took over the Paramount Theater in Shanghai in celebration of Michael's 40th anniversary show. The event began with a pre-show greeting from brand ambassador Gao Yunyun, followed by the live stream of the show, which featured in-studio commentary from brand ambassadors Wang Feifei and Lorena Song. As a result, the show generated 26 million views in Asia. These marketing initiatives continue to highlight our brand pillars of speed, energy, and optimism. This helped contribute to a 20% year-over-year increase in Michael Kors global database. Overall, we are extremely optimistic about the future growth of Michael Kors. The strategies we put in place over the past two years have been generating high consumer engagement as well as attracting new and younger customers. Additionally, we continue to elevate the brand positioning at Michael Kors which is driving higher profitability. In total, Capri Holdings' first quarter results significantly exceeded our expectations, demonstrating the power of our three luxury houses and the execution of our strategic initiatives. The strength we are experiencing today is a direct result of the dedication, focus, and talent of all of our employees around the world. Looking forward, We are pleased with the progress our luxury houses are making towards their strategic goals and the pace of their revenue growth. While it is clear the world will continue to see challenges as the global pandemic evolves, including regional closures and temporary restrictions, we believe the ultimate path to recovery remains strong. As we have shown, Capri Holdings has the proven ability to successfully navigate these challenging times. Capri Holdings, with our three powerful luxury houses, is positioned to deliver multiple years of revenue and earnings growth. Now, let me turn the call over to Tom.