Capri Holdings Limited

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 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 fourth quarter and full year fiscal 2025 conference call. With me this morning are Chairman and Chief Executive Officer John Idle and Chief Financial 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 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 non-GAAP measures exclude certain costs associated with impairment charges restructuring and other charges, ERP implementation costs, CAPRI transformation costs, and transaction related expenses. To view the corresponding gap measures and related reconciliation, please review our latest earnings release posted on our website earlier today at capriholdings.com. I would also like to note that given the pending sale of Versace, beginning in fiscal 26, we will reclassify Versace as a discontinued operation. which means it will no longer be included in our non-GAAP results. Therefore, comments on today's call will focus only on Michael Kors and Jimmy Choo. Now, I would like to turn the call over to Mr. John Idle, Chairman and Chief Executive Officer. John?

Thank you, Jennifer, and good morning, everyone. I would like to begin today's call by discussing our recent announcement regarding the pending sale of Versace to Prada Group. After careful evaluation, we concluded that the most effective way to maximize value at Capri Holdings is to focus our resources on the compelling growth opportunities within our Michael Kors and Jimmy Choo brands. This transaction also positions us to substantially reduce our debt levels and reinstate a share repurchase program in the future. Both are important steps towards enhancing shareholder returns. 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, our strong balance sheet, and focused senior leadership team, we are well positioned to accelerate the growth trajectory of both Michael Kors and Jimmy Choo. Entering fiscal 2026, we are optimistic about our path forward. While the macro environment has become more challenging with uncertainty around tariffs, we remain focused on executing against our strategic initiatives that are designed to improve current sales trends and position the company for future growth. Across our luxury houses, we are focused on building brand desirability through compelling storytelling, exciting fashion luxury product, and engaging omnichannel 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. 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 capabilities to grow e-commerce revenues as well as increase store sales densities. Fourth, we are focused on stabilizing and returning our wholesale business to growth. Now, turning to our fourth quarter fiscal 2025 results. Overall, our business remained challenged and we were disappointed with our performance. Revenue decreased 15% during the quarter as we were impacted by the continued softening demand for fashion luxury goods globally. Our performance was further affected by store closures, as well as ongoing reductions in the wholesale channel. At Michael Kors, fourth quarter revenue decreased 16% compared to prior year. Despite these results, we began to see encouraging signs of progress stemming from our new brand storytelling and product initiatives during the fourth quarter. In our own retail channel, we saw a sequential improvement in March that accelerated into the first quarter. Michael Kors is a powerful fashion luxury brand that has a strong heritage, and we are eager to build on this solid foundation. 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 over time. First, we are focused on engaging new and existing consumers through a modern interpretation of our Jet Set heritage based on our brand vision of traveling the world in style. Second, we are reinforcing our iconic brand codes and creating exciting product with compelling value to drive higher full-price sell-throughs. 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 return it to modest growth in the future. In February, we launched our new Jet Set storytelling, which reconnects with the heritage of the Michael Kors brand through our new brand vision of traveling the world in style. We are amplifying our storytelling strategies around a new franchise called Hotel Stories, a series that captures and conveys the very essence of our brand. The first chapter of Hotel Stories took place in Ibiza, at the Montessor Hotel featuring English actress and singer Suki Waterhouse. The story features exciting fashion moments captured in Ibiza and at the hotel while celebrating the joy of traveling the world in style. We are pleased with the consumer reception to our new Jet Set brand vision and believe it is helping us reignite brand desirability. According to our consumer insights, we have seen an inflection in brand affinity as well as a significant improvement in purchase intent. Additionally, our new storytelling is generating higher engagement across social media. We continue to believe that one of our most valuable assets and key differentiators is our founder and chief creative officer, Michael Gores. As a world-renowned fashion designer, his iconic runway shows cast a powerful halo over the brand. Michael's fall-winter 2025 runway show channeled relaxed chic in a space inspired by a classic downtown New York loft. Attendees included Sookie Waterhouse, Uma Thurman, Kerry Washington, and Lea Michele, among others. During New York Fashion Week, Michael Kors was the second most engaged fashion brand on social media. The show generated over 170 million impressions and 60 million video views. The combined power of our Jet Set storytelling and data analytics capabilities helped contribute to a 10% year-over-year increase in Michael Kors' global consumer database.