Capri Holdings Limited

of our houses as well. As it relates to our assets, first and foremost, we're a public company and we always are looking at shareholder value. We know we have two highly valuable assets in Jimmy Choo and Versace. We, like you, have read a lot of the speculation that's been out in the marketplace. I think I said on the last call, we're always going to listen to interested parties who may or may not have an interest in these assets. Currently, that's not what our strategy is. Currently, our strategy is we're going to build three businesses, and we think, because again, we've got three incredible assets, and where people are interested in parts or the whole, we will always have that conversation, but that is currently not our focus, or currently our focus is on meeting with you all on February 19th and sharing what our strategies are for growth with three incredible fashion luxury houses. Thanks.

Thanks, Ike.

In the interest of time, we ask that participants limit themselves to one question. Our next question is from Brooke Roach with Goldman Sachs. Please proceed with your question.

Good morning, and thank you for taking our question. John, I was hoping you could elaborate on the expectation for retail to improve to flat to slightly positive, excluding FX and some of the store closures. Can you help us understand what assumptions are embedded within that, the most important strategies that you're putting into place and when, and what you're assuming for traffic increases and the impact of your marketing plans relative to core like-for-like improvements in product that you have better visibility to. Thank you.

Good morning, Brooke, and thank you for your question. So, Brooke, I would say the first thing always for us is amazing product. And I'm very excited by what our teams have put together at all three of the houses in terms of product innovation. And again, our own retail buying teams have seen this product in particular for fall. That's where the markets that we're in today. And they have given really incredible response to what we're doing. And so I think that we feel that we have a pretty good understanding of what we need to do to excite the customer. We're not going to be perfect at that, but we feel in a much better place than we did a year ago sitting here at this time. Secondly, I think the marketing initiatives, and I'll start with Michael Kors. As I said to you, we've done a lot of work internally as well as research externally. And we think our heritage and leveraging our heritage in a modern, underneath a modern lens, is going to really have an inflection with how the consumer interacts with the brand. That being said, you've seen that all three of our luxury houses have had very strong database growths. So there's tremendous interest from our customers, and the database growths are people who are purchasing from us. So we're seeing that as a very good lead indicator. And I think what we're seeing with, let's call it high single-digit growth, traffic decline that we've seen at many of the brands, less so in North America, more so in Asia, et cetera. We're looking for that to flatten out next year, and that will be driven by our marketing initiatives and how we're bringing people to our stores or to our e-commerce sites. We're going to share more of that with you on February 19th in a fairly specific detail. with each of our CEOs who will be present at the presentation and our marketing teams as well. So we feel good about that. And then lastly, again, more in Versace and Michael Kors, some of the initiatives we've made in our pricing architecture. I'll give you one good example. In Versace, we've launched a new bag called the Tag Bag. and the early indications are very, very strong, a little younger in its attitude, and the pricing is between, I think, $9.50 and $12.50 in that range. And so it's still luxury pricing, but the more opening price point of luxury, and that's just a balance point that we were missing previously, and now we're getting a very good reaction to that. We've introduced a new sneaker called the Galaxia in Versace. It retails for $550. We're off to a terrific start with that product. Again, we're still going to have sneakers that are going to retail for $1,000 as well, but we were probably missing some of that entry level for the more aspirational consumer that we had previously, and we've had a weighting issue in terms of what that looked like in the line. And then lastly, there's going to be a very large strategic move on the men's side in Versace around our silk shirt pricing, which is a very big part of our business in men's. And in fact, when we look at the real out-the-door price versus what we were trying to sell it at, we're bringing those down in many cases from some 1,500 euros down to 950 euros. And we think we'll get better full price selling, improve our gross margin, And interestingly enough, some of the early work that we've done around that is our AUR actually went up in Versace in the third quarter. And we think that was a lot because we reduced the promotionality and some of the work we did around some of our opening price points. So we think that's going to start to gain traction as well with the consumer. And then the last thing is I want to point out in the Michael Kors business in particular, I think we mentioned that there was a strategy around reducing our signature, which was a very, very significant part of the Michael Kors business. We believe that we will be in a very, very strong shape beginning towards the latter part of the spring season, and we believe that we can get that signature penetration back up to 40%. That drives a lot of consumers, both loyal consumers, tourists, et cetera, into our stores. And the marketing programs we'll put around that we think will really help enhance the way that consumers experience the microcourse brand. So we've got a lot of things, Brooke, that we think will help us get there. And we're going to be coming off of some relatively low comps after the poor performance that we had in 2025. So I think our expectations are modest, and I think they're achievable. Thank you, Brooke.

Thank you so much.

Our next question is from Oliver Chen with TD County. Please proceed with your question.

Hey, John. You mentioned quiet luxury on the call earlier. Just curious about your thoughts on the evolution of that relative to core and signature and what you're doing at the Michael Kors brand with where you want to go with fashion execution. Also, as you think about outlet versus full price segmentation or thoughts around that, that would be helpful too. Thanks a lot.

Sure. Thank you. Good morning, Oliver. And I want to first start with Versace on that question because I think as I stated in my opening remarks, it's almost two years ago that we started to really reposition the Versace brand. And we made a decision that we were going to lean into luxury and craftsmanship, more the history of the origins when Gianni and Donatella founded the company. And we made quite a statement with our fashion show out in Los Angeles. And we believe very, very deeply in that strategy. We are cleaning up the Versace business. We have some other announcements we'll make on the next call on further things that we're doing to position this brand as a pure luxury brand and competing at the very highest ends of fashion luxury. And we're staying, we're keeping our head down. It's painful, but we're keeping our heads down and we're going to stay the course on that strategy. We have a very balanced full price to outlet structure in, I believe, all of our businesses, in Jimmy Choo and in Versace. Whether it's in full price centers, we sit with the best luxury brands. And in the outlet centers, we sit with the same as our competitors. So we're, we believe, very tight with our distributions. Both of these companies have approximately 220 doors each. And we think that's the right distribution. Ultimately, that could probably be closer to 300 over time, but we're kind of going to keep our head very steady with the store networks that we have today. And there's no question the quiet luxury trend is still in place, and you know the brands that are performing extremely well around that initiative. We did quiet Versace down from its positioning when we bought the company, and some of the key indicators, especially the VICs, I think you saw on our call, I mean, it's up over 20%, and it's driving huge velocity for us inside the stores. And so we know we're doing the right thing. She, and especially the wealthy customer, is leaning into us. And we know if we get that right where we didn't have that right before, and we start to now turn back on some of the initiatives around the aspirational customer, we think we're going to really see an inflection in Versace as we move throughout the year next year. And again, on our next call, we'll explain some of the other positioning things that we're doing that I think it'll be helpful for you to understand what we're doing at Versace. And then in terms of Michael Kors, if you really look at the Michael Kors style and look, which is more of our historical look, it was based on a lot of glamour and a lot of product that really was right during its time period. The transformation that happened at the company was too strong to try to really look at a Gen Z customer in particular and to try and lean into that much more heavily. And unfortunately, that alienated our core customer and some other things. But when you look at the product, and it's literally arriving in stores over the next few weeks, and the marketing campaigns, you saw one of the pictures with Suki Waterhouse in our press releases. You'll see that what we're really looking to bring Michael Kors back to is something that's incredibly chic and glamorous, probably not with that level of shine, but it's going to be very much about standout style, which you'll hear about at our upcoming Investor Day. And Michael has been such an incredible talent for over 40 years. He's got a lot to offer. for the consumer from a fashion point of view. But Michael's always brings it to you in kind of the most chic perspective. We may have lost that over a 18 month period of time. I think it's back, it's gonna be back very strong. Michael is highly engaged and has a great vision on how and where he wants to take this company. So I think you'll see that in quietly all channels from us. And again, you've seen us reduce our store fleet Our ultimate goal is to get down to about 650 stores worldwide. And that will be smaller distribution than some of our competitors. Also, our wholesale distributions won't be that far off in terms of alignment. I'd say, quite frankly, very much the same. So we're going to be, you know, if there was ever a concern that this company was over distributed, I think that's no longer an issue. I think we have the right balance of full price and outlet. And lastly, as we talked about in our previous call, we're going to renovate about 150 of our stores. Those will be primarily our full-price stores over the next 24 months. We're starting that project literally as we speak. And we're excited about the new store concept. And again, we're going to talk to you a lot about that at our February 19th investor day.

Thank you all. Thanks, John.

Thank you. Our next question is from Paul Ledgway with Citigroup. Please proceed with your question.

Hey, thanks, guys. Tom, I'm curious if you can give a CapEx number for next year, just what you're thinking about. And then, John, from you, it's just at a high level. I'm curious if, you know, as you went through the merger period, just how much of that distraction and uncertainty contributed to what we're seeing in the business today, where your hands tied? in any way, things you wanted to do, actions you wanted to take that you couldn't, what were those, and how easy is it to get some of that in motion, and is that kind of what we're seeing today? And then just last, any big holes in leadership that still need to be filled that you could share with us?

Good morning, Paul, and thank you for your question. I'll start with the merger, and again, not a lot really to comment per se on that, but It was highly distracting for the management team. And I think as we've said in our previous call and in this call, there was a lot of work and energy and effort that went into the management teams preparing for that potential merger. And so I would just say it's highly, highly distracting. And we didn't have as much time to work on our longer-term strategies. And I would say that there was some confusion about what strategy should I be working on given where the company was going to be at whatever period of time. But we've obviously put that behind us. And I think we're super engaged. And I have to compliment the senior leadership team at all three of our companies for rebounding very quickly, putting in place strategies that we think are going to drive the business I think Jimmy Choo has always been relatively clear about where they're going to go and how they're going to get there. We'd like a few more weddings to happen right now. We'd like people to dress up in a few more high heels, but we're feeling that trend's coming our way. So we're feeling optimistic. As I just mentioned before, the Versace strategy, we feel quite confident that we're on the right path once we really start to anniversary some of the, in particular, some of the quality of sale initiatives. And that's something that goes back to Brooke's question. We'll kind of anniversary most of that by the end of calendar year this year. Some of that will actually anniversary in the beginning of fall season. So we think as the consumer understands that particular full price challenge in Versace, they're not going to see that level of discounting happening. It will start to bear fruit for us. And then lastly with Michael Kors, I'd say that's where really the biggest strategy changes had to take place. And with the ending of the merger, it gave us much more confidence to make that move, make it bold, make it quickly, use the data analytics and consumer insights to guide us, and quite frankly, use Michael's vision to guide us. And if the little tiny green shoots early on or anything between some of the handbags that we talked about that are getting traction and some of the consumer wholesale reaction are any lead indicators, we're feeling good about the initiatives that we put in place. And then lastly, in terms of leadership, the answer is we lost very few people during the merger. And again, I have to say thank you to our global teams. They have had a dedication to this company, and we believe that they will be Hopefully, it's part of the secret sauce that will be moving us forward to returning to revenue growth in particular in fiscal 27. But as we move towards operating earnings growth in 26, our teams will be critical to implementing and making that happen for us. I'll turn it over to Tom for your other question.

Paul, regarding CapEx, for this year, fiscal 25, we expect to spend approximately $125 million in CapEx. And that's for systems and limited store openings. For next year, we're looking at about the same range. And that will support the beginnings of the Michael Kors renovation program for our stores. Some very focused store openings. We're closing many more stores than we'll be opening next year. After this year closing over 100, next year we expect to close approximately 70. And then we'll also be investing in areas like e-commerce and data analytics. So it's approximately the same year over year.

Thank you, guys. Good luck.

Thank you. Our next question is from Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi. Good morning, everyone. As you think about, and you were just mentioning, Tom, the retail store changes that are going on, How are you thinking about outlet versus full price in terms of what you're opening or closing? And when you think about the marketing spend that you're investing, John, how do you think about it by brand? And are there any other metrics that you're looking at in terms of new customer acquisition that you're targeting to gauge the business as it progresses? Thank you.

So good morning, Dana. And let me start with the stores. And Tom was, or CapEx, Tom was correct. We're going to continue to invest in upgrades to our technology inside of our company. We've spent hundreds of millions of dollars over the last few years, and in particular on our e-commerce and our data analytics capabilities. And so we're in a very good position there. And we're just going to have to spend less going forward as a percentage because of the amount of effort and technology that we've brought into the company over really the past two and a half, three years. So we feel good about that, number one. Number two, we are going to close some 75 stores next year. The majority of those will be full-price stores, and the majority of those will be microcores, full-price stores. And we think that we, again, have a very good balance between full price and outlet stores. We are not opening new outlet stores, so the distribution and store count that we have today will remain flat over the next few years. And we're going to work very hard to, across the group, and we've said this in my prepared remarks and Tom's, we're really looking at once we finish most of our store closures, which should be by the end of next year, next fiscal year, that we're really looking at densities and productivities inside the fleet that we will have. And so the point that I wanted to make is the majority of our CapEx around stores will go to actually store renovations. And it's early days, but we are encouraged by the new store concepts, and you'll see those At our presentation, we're encouraged by some of the early results that are taking place there. And so we're going to put more investment as a company into our retail fleets than we will into where we've been outsized investment in IT and technology over the last three years. And now we'll go more into CapEx inside the Michael Kors store fleet in particular. We've really renovated most of the Versace fleet. It's probably 90% renovated. Jimmy Choo's about the same. So we're going to really target the majority of our investment around the Michael Kors store fleets. And then lastly, in terms of marketing spend, depending on the brand, we're spending between 7% and 8% on marketing. It can go higher than that, depending on how we see the results of certain initiatives that we're putting forth. And Dana, I would rather leave that piece of the initiatives to our investor day because we have some very interesting tactics that will be as forthright with you as we can without sharing too much with our competitors. But we're definitely looking at how we market through a different lens even than what we did this past year. Thank you, Dana. Thank you. I would like to thank everyone for joining us on this call today. We look forward to seeing you on February 19th to share more of our longer-term strategies. And additionally, we will be speaking to you about some of our longer-term guidance as we return the company to revenue and operating earnings growth. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.