- Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Capri Holdings Limited Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Davis, Vice President of Investor Relations. Please go ahead, Ma'am.

Jennifer Davis

thank Quarter joining Fiscal and Holdings on everyone, Second Limited 'XX morning, you us for Capri Good Conference Call. morning Chief Operating this John me are Chief and With Executive Idol; and Tom Financial Officer, Chief and Edwards. Chairman Officer,

those you could in Before that the in certain on available call described to today's cause made a and forward-looking update which at non-GAAP which actual company statements discussed constitute risks associated certain non-GAAP website. financial to information COVID-XX press costs from that are are later we results may me subject call we and during the other made undertakes charges. operative risks let information SEC implementation uncertainties are call. company's otherwise be with website release at and and the to will basis. on on GAAP a Investors call obligation corresponding statements, no presented and the noted, filings, any begin, expect. should the this remind Unless Those release charges, company's today's the remain view not related uncertainties differ and posted will on These on all the capriholdings.com. costs, assume that costs, on exclude measures impairment time, measures today earnings related our Capri please To restructuring view transformation earlier ERP reconciliation, charges, today's statements

turn the Executive to over like Chief Officer. Idol, would I and Mr. Now call to John John? Chairman

John Idol

record continued our power momentum luxury X of were the delivered strong our second houses, all We earnings pleased as as and our Holdings performance strategic good of reflecting quarter as everyone. morning, Thank well growth Results across Capri of brands. the driven per our share. and execution initiatives were you, Jennifer, by revenue with

uncertain carefully macroeconomic remain due now currency the environment, for cautious increasingly we fiscal to impact the our remainder controlling headwinds, our ongoing XXXX the by growth. focused our will of China. long-term we and on are growth manage we business to of headwinds Despite sustainable on near-term we more and Day in that initiatives potential, revenue future an Investor drive profitability confident our restrictions at focusing in presented strategic While Accordingly, in recent outlook foreign COVID-related we will executing remain expenses.

Gintzburger second to strategic new growth turning forward getting Chief future. I experience houses. Before him for He results, will Officer building strengthen and We our luxury fashion We and plans a accelerate believe like as of of vision Executive Emmanuel would initiatives. to Versace proven look track our welcome to in quarter his has record us Versace. global you the help further know to our

quarter basis in Revenue X% currency. XX.X% gross and was margin Now $X.XX. per diligent margin expense XX% turning of above of was performance. to Operating in and a with We expectations, our second second quarter on share expectations, delivered reported record increasing earnings line our constant better-than-anticipated management. reflecting

largest more of names databases our year-over-year desirability the strength This and increase XX versus year. new terms we the our our across acquisition, the prior added is customer In demonstrating in history, than brands. million of

and revenue Asia, down high-teens reported results driven revenue Now in increased Americas, driven Mainland in luxury from currency. in in constant the X% with travel. a robust double-digit all and constant as the on Asia reported In basis currency. XX% well down but by trends revenue currency. This In an with double-digit strong group This looking benefiting quarter XX% for increase across domestic Southeast constant as increased our our of In EMEA, growth by at was and products. second revenue growth revenue houses across basis sustained China consumer strong geography. in X% houses low increased Japan decreased all on demand XX% in reflects by a demand

brand. to reported increased quarter brand's X% performance with were on We we continue margin Versace. as the Revenue as initiatives to our vision. trends revenue of basis constant pleased to by Starting XX% were on strategic currency with a revenue expectations. ahead prior bold consumers and and compared a Moving Donatella's our on second to year and fearless execute operating design and responded

prior which Turning component to Women's key growth our approximately product. Starting sales XX% a are channel accessories in strategy. our versus with of year. increased retail accessories,

focusing We on of assortment Virtus expanding are of while Goddess. our the existing by La the Medusa Greca pillars gaining with traction and launch

new pillar. with to pleased initial response Greca We the our are

With progress Medusa, to position leading making Greca, luxury Versace a as goal Virtus these house. and pillars, we significant are X La in our leather

of footwear. authority women's component is gain codes. focused as women's our we continued our iconic as to core luxury expand Versace footwear offering to growth expanded Another on brand a strategy

and driven Second new strong styles Versace Medusa. women's as were sales quarter our channel in pattern prints. men's codes, Greca La embraced consumers range well and ready-to-wear, by retail the In featuring including Greca as Barocco a of

We to core broaden expand which reach. codes house Versace's iconic to lines, also continued our incorporate

awareness continued brand campaign, XXXX The Italian to Versace's consumer Moving Lily deepen and heritage fall desire engagement. which shot was James Versace house's embracing to storytelling. and runway in Rome, consumer through powerful glamor. starred

media globally the show engaged vision Week. Milan both Week. bold views is Versace fashion inspired the was mentioned of top Fashion million the glamorous. spring show over among modern and was generated during brands show who was online Milan woman, The Fashion social most XX Italian during Versace XXXX and Donatella's by Additionally, on The

long-term global house's growth strength luxury to to led reinforcing the and social success quarter data across in event collection. initiatives, of growth Asia. to and restaged Overall, the and XX capabilities activities brand-building models Bangkok, the turning our Versace year-over-year and XXXX attended analytics brand influencers XX% driving nearly of the these million launch combination increased potential. consumer The fall impressions generated the of results fashion fall an our strong confidence Versace's speak with media. show Celebrities, in second the Now Thailand, acquisition of the in database. coinciding our strategic the Versace's

anticipated. operating Moving with to strategic design our a better XX% as second prior were margin was basis results. year consumers Choo. compared Jimmy on we and constant quarter our on in We the than to Revenue to responded Sandra execute reported and continue glamorous initiatives line was increased and in Revenue X% expectations, vision. pleased currency with Choi's to

product. to Turning

One XX% Women's increased of Jimmy accessories. strategies second retail our quarter. Choo's in to expand sales channel key is accessories over in the

response well, perform Bon have we Bon Avenue. with to launch family were exceeded early expanded our iconic Avenue, and of We Our continued the sales the VARENNE our to expectations. with pleased VARENNE and

to for sales footwear unique our retail in sole in digits performance casual opportunity. resembles strong is driven diamonds Maxi double new maximize its platform strong channel strategy the Another Diamond key product with Casual Light set of stone. our Jimmy increased that Choo by

Moving engagement to and brand by and analytics. consumer awareness acquisition storytelling Jimmy and consumer data engagement. continues to combining Choo drive

accessories, to consumer embodies series over our excited XXX increased as X Kendall and the XXXX In and Jenner Japan, actress Time face feature social us series, Instagram her the skyline, introduced against glamorous, the daring are to new Jimmy which and media Choo's is Dare a We Kendall across sneakers. followers spirit has of of fall a continuation Kendall nearly has million Choo's Tokyo featured Ayami is Jimmy latest new accounts, friend has of images boots The model the Choo brand. In the million Jimmy she as of followers autumn's confident of set campaign. and reach. Nakajo customers. on actress helping In must-have house. with reach the

consumer with our database. house's storytelling strong combines increase which communication, contribute speak reinforcing a confidence brand the data the customer quarter strength growth Jimmy engaging of Overall, of the our to initiatives, Choo's in year-over-year XX% Our Choo's analytics, success strategic Jimmy second the potential. global results luxury future helped and to in

our Revenue execute glamorous to were Turning Michael's line X% to the compared to basis currency than expectations, in second the as and in a results. better to increased quarter strategic responded jet was prior and Michael and consumers year anticipated. we set our Kors. design initiatives margin XX% vision. Revenue with We continue was reported constant on on operating with pleased

Turning to product.

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expectations our the continued are and also pleased the well. response exceeded We to to collection, with globally. Signature perform initial sales

retail channel our in result, globally. a mid-single accessories As sales increased digits

Turning to footwear.

our we Michael discussed drive revenue. during we our as single channel we we Kors footwear Investor the As codes on sales digits July expand brand Day, our exciting capitalize believe in and increased quarter fashion. significantly retail to high to during continue incremental can deliver Footwear

Kors, which by globally Accessories we retail sales growth Michael opportunity strong edge. another double Signature were men's, sales second a essentials styles. as for timeless strong quarter at on driven digits Looking increased is focused with modern

featuring brand's Jet Set with DNA and created London. Bella global Michael glamor awareness York friends celebrates New region, as allure In The in we York Kors his extension and to Kors of his Hadid Michael the for for Michael explore MICHAEL Set engagement. campaign travel. the campaign the increased as turning as extravagance. Kors love Collection He highlights Asia, localized focus opulent our campaign campaigns New Now Cong. City The consumer fall and Michael's passion as Jet supermodel City Chinese well brand the reflect of a

theme Yuanyuan to took was views million The an over which in XXX show. immersive XXXX social China, our York resort Brand FeiFei, generated joined of influencers of laid-black spring were Fashion life heart over Kors press. the Michael guests, Week, resort, by Wang Kors elegance Shanghai combined the glamor media. of Gao venue During The engaged of spring Michael getaway. view In urban including brand and city highly fashion the ambassadors, most 'XX on models, the globally. the and top XX with was show over the show New

our As show Weibo. and a by over contributed database. data a result, XX streamed Set XX fashion was and XX% storytelling global the our media analytics of to over viewers Kors in million live year-over-year generated Jet capabilities power Michael the impressions, social The combined million event increase on

Kors more I drive pleased opening approximately Both that open elevate announce are in before feet and XX,XXX to are Michael assortment. one to Bond also in New These luxury on X new be entire holiday significant City on we Madison Street our to our Turning will being fleet. cities. scheduled the retail York revenue square year also flagship showcase only in locations, retail one season. am London. They next brand, locations but will the to to stores not are and designed Avenue major

during launched Kors. Finally, I'm we marketplace used by Pre-Loved sustainability. announce Michael to to items Pre-Loved Kors selling commitment Michael happy official site the and our driven from the quarter The is that buying gently Michael for Kors

to best to is Overall, give purchases Michael of well a as their giving initiatives. another customer. new Kors while the as our the goal results the speak beginning of Michael strategic Our Kors' success consumers items those for the value strength stylish brand past with quarter second

per in As conclusion, revenue we delivered share. quarter growth second were earnings continue we Michael the confident and record Capri's are brand we we In with potential. strong Kors' elevate as future results pleased to positioning,

near-term conviction Looking in forward, reinforcing over to brands recognize our macro and strong there deliver enduring are have revenue ability time. proven uncertainties, growth while Capri's our resilience, and we value earnings powerful

the at our of also strategic is group employees by talented executing Capri Holdings confidence are Our that initiatives. underpinned

the me call turn over Tom. let Now to

Tom Edwards

second Net billion expectations. expense Thank with Revenue resulting operating everyone. and above Starting diligent line income earnings $XXX you, $X.XX increased currency, and our John, X% good and morning, of gross This in of million, prior was margin $X.XX. versus reflecting XX% higher-than-anticipated with in constant diluted year primarily quarter in was management. results. share per our expectation

in Revenue XX% At sales By revenue performance X% XX%. geography, constant by currency. Global currency. constant Japan growth reflecting Revenue EMEA currency. by in in in prior Southeast year basis XX% an X% China. on on a constant in offset expected constant XX% in versus revenue to revenue brand. retail increased Turning Americas reported Asia increased a increased in currency, increased reported basis in double the and digits Asia, and strong and increased XX% Versace, partially total decline and in

reported increased Americas For last but increased currency. on constant in to constant X% Revenue single partially in expected sales revenue China. in on XX% revenue increased increased compared prior in total a and by reported currency. XX% expected EMEA year increases digits year basis Revenue Jimmy on currency. constant constant and increased increased decreased constant on sales geography, basis in Revenue basis currency, retail currency, reported Southeast in EMEA X% At X% X% increased Japan Global XX%. X% Kors, Global in Asia currency. Choo, total reflecting strong decline the growth XX% digits in the and to constant but partially offset constant basis Revenue flat Americas in decline and XX% high in increased increased in revenue an was XX%. revenue Southeast Asia, XX% By Japan X% retail in a By offset by in in Asia in a double geography, increased in Asia, constant China. in and reported reflecting decreased Michael currency. but in a currency. an

versus total as On basis year. points above was in costs. by versus reflecting expanded operating was operating higher operating on our and expectations. of prior points Better-than-anticipated primarily sales. points absolute was million in year, operating as But looking in of margin associated Operating XX.X% brand our of be basis expenses. of strategic increased approximately margin benefits X% expanded this points continued X.X% were Gross company driven Jimmy basis and expense increase year At with prior leverage year, Now increase prior operating expanded variable basis performance. year reflecting initiatives. last an Versace, increased higher to Kors, XX At expense expectations. our operating at sales. a And revenue operating the greater Michael and XX.X% XX.X% of basis, supply All to margin XX.X% above year-over-year. basis XX expenses XX.X% of prior exceeded below or expansion we company the XXX Choo, margin basis XX.X% impacted versus our reflecting compared chain percent lower expanded primarily points was marketing margin XX the XXX $XX margin prior results by margin year. Total of XXX gross versus margins points expectations,

reflected to was compared last for Our of discrete a quarter rate tax benefit. rate the XX.X% which year's X.X%,

$X.X resulting turning balance Now net to $XXX and debt ended in cash million our the $X.X quarter of We with sheet. of of billion, debt billion.

worth repurchased in return our shares we commitment the of second cash ongoing shareholders, part As to quarter. to approximately million $XXX of

another million in of repurchased quarter-to-date quarter. worth $XXX the third we Additionally, shares

authorized Given balance program. generation our strong $X a free repurchase cash flow new and share sheet, our Board has billion

We inventory. first sequential XX% expectations. levels, billion, the quarter at last Looking pre-COVID line the quarter a XX%. inventory with $X.XX in compared This second a quarter Relative our deceleration increased year. to to over a significant was with increase ended and low-level historically

of the into inventory inventory core our merchandise good levels As We new holiday anticipated great more elevated a heading receive reminder, as seasonal hold we the to we're in quality feel position season. supply as about a implemented delays. believe chain as inventory we programs well given earlier and

at year expect moderate as the be sequentially of look we fiscal we below the the end planned, and levels remainder by flow of for year. will year, prior As the inventory

Now turning guidance. to

increase Holdings a Capri basis, over we taking COVID-related on are reported This X%. our China. forecast Therefore, is increasingly $X.X approximate given of revenue currency for now of the while currency approximately prior annual a restrictions a more approximately conservative expected ongoing represents to the macroeconomic fiscal basis, and We revenue on increase view constant environment, billion. to impact headwinds uncertain in 'XX, foreign outlook an of revenue X% remainder year the

an primarily Kors. now see own all across trends remainder revenue impact X the solid in and in reduction increased the we rates channel guidance Michael retail restrictions evenly exchange wholesale $XXX million is by includes currency in the of reduction split brands, from driven continue foreign to channel approximate China. our While between of The

$X.XX in and on Versace Jimmy a of full XX% year Kors and now in revenue an increase constant assume Choo and X% approximately currency; of billion, constant approximately at basis currency. X% X% and billion, approximately we of a approximately revenue XX% reported Looking basis approximately million, Michael $X.XX on on approximately increasing a of approximately in basis revenue guidance approximately constant down reported brand, by $XXX X% increasing reported currency; revenue

increase to $XX compared margin For approximately We expense XX now the approximately year, of The basis of we expect approximately gross expectations. basis 'XX. the now points expect initiatives. reflects margin of previous of points prior and expansion of This our margin to gross an a prior savings XX.X%, strategic full benefits million to the guidance. relative fiscal company's outlook operating increase compared XX to reflects higher relative year increase ongoing

For continue approximately of margin to Versace, we anticipate XX%. operating an

we we operating Jimmy to continue an approximately For margin for Choo, Michael X%. Kors, margin approximately And now of anticipate of expect an operating XX%.

certain million. interest net Turning approximately anticipate to our around nonoperating now expectations items. expense We of $X

Our be average tax rate expected we of weighted shares effective XXX approximately forecasted outstanding XX%, million. and is to

are $X.XX we prior guidance double-digit As earnings approximately versus fiscal per growth diluted year. our a representing reiterating of result, share 'XX, for

to flat We on anticipate X% in Turning reported year-over-year quarter company total constant an currency. approximate revenue year $X.XX This decrease guidance. of third prior represents approximately to or basis a billion.

For XX% X% $XXX reported approximately Versace million, approximately in revenue we quarter increasing of on revenue by decreasing third approximately forecast constant basis a brand, currency. and

million $XX reduction from reported decreasing $X.XX wholesale in revenue on not increasing an X% basis constant a Jimmy now currency. basis year their prior approximately approximately of reminder, December. and third in and revenue to million, in Versace X% XX% on channel. approximately include and constant X% on Choo a As approximately of approximate billion, lag, the a Michael reported quarter Kors reports And a does includes $XXX approximately X-month currency. This revenue

reflects of This now margin XX.X%. quarter operating we expansion third offset margin margin, on deleverage operating at lower sales. approximately by expense gross expect Looking

we of high terms range. brand, by for in operating In operating an margin the anticipate Versace, single-digit margin

seasonally a is the does which is for the lower single year. profitable most it Versace quarter margin since of quarter Third month December, include not

for Kors, to Choo, the also operating we in Jimmy single-digit And margin Michael expect XX% operating we range. mid- in For range. high high anticipate margin the

nonoperating weighted expense million. expectations $X approximately net an We of XXX of and tax of forecast rate Turning X% outstanding approximately our effective interest around to average shares certain million, items.

$X.XX. As share a result, diluted of now expect per earnings we approximately

take to of of revenue now Now a a currency X% quarter. I flat decline billion, a $X.X anticipate on discuss fourth our constant a moment to for We basis like on would the revenue expectations basis. reported and

As a a XXrd quarter included reminder, last year's fourth week.

operating Excluding growth of well reflects are X% extra delivered consistent results as week, and the with that revenue. constant wholesale revenue In the second represents share. as we approximately in per earnings increase channel conclusion, we our revenue with pleased in third impact growth, guidance a quarter retail record margin our lower This trends expansion currency. of strong as is our quarter

view taking we year, the business we year is guidance, which a earnings half our cautious a more the model. While are back testament are full of strength the maintaining of to our of

we growth 'XX, and optimistic for potential Kors. long-term about the remain fiscal Beyond Versace, Michael Jimmy Choo

Our and growth in deliver enduring to the strong powerful our earnings revenue have time. over reinforcing brands confidence resilience, proven and value ability

open up questions. the Now we will for line

Operator

[Operator Instructions].

comes from question Boss with first Our Matthew JPMorgan.

Matthew Boss

Great.

positioned the for consider in you at brand $XXX Michael direct-to-consumer? just caution demand you softening accessories that we to levels notable inventory elaborate into reduction? million Maybe And the seen half as any portfolio increased wholesale across have embedding your do see Kors you're could on now in the you your current category holiday? date how John, then back guide, So

John Idol

both I'll to North channels. as talking seeing sales strong. relates own We're our we're of very direct-to-consumer/e-commerce in of own the about And that's extremely it actually trending and first pleased in Europe, robust quite our those part so our channels. markets. business, start actually retail In in And America

we're and had very We're with could attracting which consumers, seeing by results. And a our large at We You with what the happening already. consumers. increase we were that's we're also was definitely level Kors, very, database strong see of that engaging pleased database seeing XX%. on business. We're with very accessories Michael

have traded -- brand, up that's well we've really at although in been all taking we're moving Kors, been positioning price And been at Versace that the of very know, increases business for you Michael of we've going Jimmy our Choo. we As elevating the as and us. particular, part both in

cities we're that, a on China. feeling ago, a we very put have have travel So seen I'm things of malls that it's we China, happening difficult. been in of various open down positive. our and months causing travel. own internal slowdown. the seen the one sure are would restrictions, We well, about and domestic and caveat little I gotten of direct-to-consumer predominantly that's having COVID great more China actually Actual or saw actually that's And close. deal either data. you've X.X And because difficulty, where a a channels, is as inside month,

approach that where we So we've for taken for to us. than a were cautious going much we think take even time more and China, it's region that to before on recover

a slowing In what of in have really seen in taken whether some we've a more know channel, terms in we behavior. We less the last over consumer few is. a We weeks know that that's of view. stimulus not that's cautious don't whether shift But result sure don't We're channel checks. the that particular. wholesale

X the we'd to have the than of inventory step less Michael preserve a you and years in channel. we in a anything, very backwards. We've elevate past, hard told don't take we've want over We'd probably As Kors Michael the this brand, more margins. and the Kors last our is rather worked to rather issue

in out back North COVID, pretty and didn't really to pared on coming program associates that's of that been COVID channels store of think note We've started the issue those other America appropriate And in in where fund department I will the I we thing. very Europe, clienteling our now significant that around doing. And more as a adding in back uplift we're shop-in-shops see seeing we that. States The and turn aggressively we is in-store Europe, the in as inventory we into to And a positive I'll in as keep And associates and I very one consumer amount going make so think over online, it do, Tom. so customer And we channel. back we United well add brand then we can business. we it more significantly can will responding had definitely again. terms sales sales that that as inventories, our the think journey the we're of the integrity. give having as are to both into of it the

Tom Edwards

And good believe on in feel didn't inventory. inventories, quality have needed. Matt. total last to in that or we of accessories wanted Thanks, we for that's really this the holiday. And about a for when the year the position we and really inventory we're And and compares great

decline we much, I better mentioned with were line versus significant from in remarks, that's only QX in of up position. in And XX% we're in a our So levels, terms XX% and a where as much And we in prior expectations. the feel prepared pre-COVID. year like inventory right versus but

So look year inventory the through year. as be sequentially levels to to the end work below prior we and and down expect forward, we continue

John Idol

note I been moved giving we continuing I be planning were view to places. be season, to moved you in make We merchandise that different We think we stuck for that think, calendar. up all were up we our but to dramatically. how sure design the also deliveries fall have didn't here flowed vessels just ready a said into what that's inventories. We Tom have -- is an important

want production with. think that adjustment. below be inventory management which a And QX, that was the teams retail we're to the in And as we the remind company year-long anticipate all just our well cadence and is so something testament great that of in of the going to to we I stay design team. really And to again, as LY inventories is teams a therefore, everyone, planning

So that's to we well that. excellent think forward. going going bode And feel I for margins our about that,

Operator

with next comes question from Our Stanley. Kimberly Morgan Greenberger

Kimberly Greenberger

results the here. margin ask wanted Okay. Great. I gross to about

some freight? supply I do product some chain than are I not inbound through in think know You you what are been then pressures do you're And primarily headwinds, on to when I the last results that through know obviously -- -- sort initiatives if Tom, significant cost cost that's inbound freight? wondering but on what inbound headwinds you think -- attribute the And of pricing falling. the freight. any of margin navigating Or performance? you coming Are sort expected, in? that I'm gross the that keep rates the And engaging we John. you better gross better that -- do global in have of the When get inflation do freight margin seeing the of think you

John Idol

going I'm but questions, address price I the both touch I'd Tom let really on to thought increases. just

now very we and seen towards accessories channel Footwear, with happen mid-single nice strategy, And particular be. single-digit price high I started in because which and again, pleased what Kors, of prepared And retail we're reaching us and lended in where is in my So accessories, in product as our a for really with the know, collections our we as business hardware. has a X you Kors where with our gross on remarks, we've Michael increases we the we've clearly that's Parker in footwear. in resonating almost where wanted new part the we in Michael with we're of XX% focusing margins revenues and Again, been carryover the to digits. consumer, then mentioned achieved to been uptick thought more higher terrific. seeing brand. -- Signature years ago both hardware as we really elevating and it's projected And our a growth were

Michael from one last a for I then not we're bodes quickly we've pricing price going the we've that season. positively say Again, to they product, years over raised beyond spring, in Jimmy what we most very fall that doing we're last want consumers see to pretty piece. to it and and back group at So prices pause for we'll Kors. significantly Choo says well take I happens responded done that's And Versace, And for pushed in our the think what standpoint, actually. the on haven't strategy price increase that. increases of but will only do the X also

in -- had place. spite of And And increases in point we're I a that basis seeing cost through in around think we our So gross recall our between XXX and I freight. you XXX great we margin. that think of you're goods was think flow

in So we're of year have strategies we into down And we amount the years. been those reduced, had been business. lastly, over up. That's put thank that step down the again, goodness, amount particular, holding last really promotionality to we've place. fairly and We've then And a X it in well. significant going that Kors, the in as next had stepping Michael

again, the that, of But hope all me let talk margin. let continue to up to gross -- you Tom the the cost about shows So in we, and freight.

Tom Edwards

It holiday. doesn't perspective Costs Kimberly, as we're line second we half, costs just levels higher the period. are supply your would initiatives. all said we aired down because we've pretty and as little we before, higher headwinds, versus for margin. dramatically. knew what It than our we're be with a by a when terms prior little is chain and supply they're much the chain that the right And lower our mean means be in Sure. upside last QX, year. against It much then, against necessarily product cost which year a we there, prior in we at being forward, in gross of times comparing driven were look on And coming will I strategic look expect comparing If expected. highest

as our basis a well by guidance felt to raise all results we look and margin And our and That a in the half. will as the we Supply as for our the above China, do have we expect gross the initiatives delivering. mentioned, QX you half, very very XX back in we we to said a headwind outlook the to be FX. chain deliver up And future our year as look on Asia, margin nicely for continue confident which they expectations. as strategic And at gross points. said, for based continuing. is region they So But high-margin are positive. second be at particular,

feeling on So side. that good

and while In of a We're we the be stronger level. may don't cost some one material dollar terms there the increases, at of are of pockets benefits forward, cost product increase. costs, looking that of see

the I mentioned freight last you increases? little a seeing when there. the what on will So was And cost we're through we question out provide maybe perspective

to there when were year we delays this point. seeing at last were As not long delays, opposed

Chinese get there we're because restrictions still have are through port heading normal if into Year. COVID-related cautious buildup we potential to the and New shutdowns remaining However,

think look I carriers. a really, renew is monitor at for at as our contracts and this we'll we take our look next So closer something freight and year annual

Operator

Instructions]. [Operator

Evercore. Saad comes next with Our Omar from question

Omar Saad

bit little was a talk could trend but in maybe, really in analytics. you're bit the hoping wholesale data thoughts could channel versus a John, you're you a and that seeing then channel? on not slowdown a elaborate maybe DTC. slower And detail seeing Any you I bit in little more more the about why DTC of on

several there. it in like terms a the seems mentioned point your of You've capabilities times in you're call, tipping hitting

John Idol

Sure.

to I the we can internally Omar, own our -- level. understand traffic, at online only speak and So both store

can And all houses see on traffic by capture. you also our up is the X that significantly. very Our of

of Sandra. up spectacular of again, how I'm look seeing from And product numbers. XX%. And good. doing it's And Versace's data and our product the Michael good by also capture sale. stores clienteling. And right And better our looking. I a You to engaged looking better and off you've and lot the in are teams, bullish are, sales the pretty looking heard comes my the think, And associates I our think is I are group so up Donatella innovation point the Choo, good storytelling Michael of and and Those at company around really XX%; getting how product great at lot and the about is talk quite a take led database really that. on us now, is Kors they're that XX%; the and hat numbers Jimmy up is I'm

have now associates really and capturing the group-wide names. place that job a much sales of in We better do tools clienteling can a

it's steam. It's even strategy. X and gaining the that last seeing been for more we're years, So working

lifetime time, Europe. seeing to some And given to we're not about at We're a that's the means also point may us we're very value, zero-COVID begin want be region. change the region hopeful for stores. look speak our cautious that I'm very basis. I customer so in we're will that very seeing going in relatively excited impact again, at if traffic in We're And because, the you of and hold us continuing that to the seeing And well what the traffic to go-forward for how same on And up in China. us. and but to fact, in America significant again, that, in policy decelerate North

the to know. inside traffic wholesale, terms because don't the stores. of we speak the We can't have don't counters I In

We know being cautious rates consumer We probably seeing with I clearly, And what is the more little the impacted people by think macroeconomic period know last by given the this fuel mortgage check. that potential also rising. stimulus we think, the of that a interest are are they're headwinds. being was, impacted I know resets. and

So we be that this things last be And of shopping think wouldn't again, are in that didn't it's versus of because number later channel. a it bit little going the impacting thought year, people last maybe to they get a year probably year it consumer those there.

we're the And and to brands a way to positioned desire. period how time. as where stay think this much very of able going are again, position to about and patient the they're focused today I consumers' are product the companies go most through in the looks. we meet X feel better We and great be just

to And we the over and period. a to interesting believe by our good of X in American all we through Omar. good want through the did And and years, season. you, last times set led a period. through is So don't our many, that to we'll part many holiday and that gross houses. good view. right a the Thank margin. consumer that we're I which of it, we you've challenging in that also And our financial strategic said brands take out, getting to we promotional is the believe X this of believe know navigate still And maybe give our COVID, we've point people But job we have this not good there up going pretty going for initiatives. fairly shape, is that's have job heard around protect way some good we're season. But know and do think holiday that's it. a strategy as We volume And to but strong who the we'll equity getting of do the a really health we I are

Operator

Boruchow Our with comes next from Wells Ike question Fargo.

Irwin Boruchow

go for sheet want you I interest the this back on that just to about I'm expecting guys income. balance are I currently guys on one. million to you Tom, in seeing actually expense focus the to of to going Tom think were going the kind summer, interest and $XX

allocation? moving components what's that sheet like think are about Now around I not? quarter-to-date. just impact you Can million does $X stock how of the you And we through with think just that in $XXX the million It floating, said it's about balance rates of rate expense. the kind you rising, us how sounds bought capital just payments? interest what's of And you interest run think should walk

just double that. to sounds check on wanted it answer So kind of is the like no, but I

Tom Edwards

us. the which as the have very start generation and as leverage is of on levels is sheet now I'll our free rate, and Yes, strength which we we're balance debt Ike, that the for cash of well very, that, manageable comfortable with flow really with

noted in to to at return the share So first the moment. we we Day, we pay in value exists debt, given as our cash have pivoted, shareholders Investor versus down believe that

And that focus the current we year-over-year is that's that. position as we balance, be continuing as little And we'll the to result you'll forward. see then in net under a balance move debt a So on right circumstances. be higher what to of believe debt

interest really couple original versus our addition, noted expense In that guidance, of things. increased a you and has it's

and The rates higher. are interest first foremost,

We So just at have that's a rate. on a out revolving debt. fixed bond we're more do paying there

Our revolver is at variable a rate.

higher part debt are the that well impacted place in and in as is generating by hedges place, is balances. be we a last that we'll income The from them in as that no are that future. had we that revisiting longer lower little So interest certain

it's that, we the to shares that's X really and buying puts really managing So back the but and focus. takes to that related want

Operator

Siegel Simeon BMO. from comes with question next Our

Daniel Stroller

Simeon on Dan for It's here.

in price guardrails over get had term. then and the have your go near what Just successes and given promotions where place the inventory on on to the architecture, thoughts there? industry And you you've

John Idol

you We that you. understand question? didn't can repeat Simeon, kind of

Daniel Stroller

Kors promotions and how and your over go the the had? here, Just where gains sector-wide you the that you've thoughts and protect term near then the just inventory pricing the

John Idol

or Look, companies industry. Okay. take speak we can't different to their positions or sales sector-wide to inventory going the are trend. Different their on

want to we our we believe And point strategic working. X can't the resonating I control And that's houses, a believe We starting consumer. we to vision that. for point. as and with have that's a So Versace

we've a at make to of build leather terms place put and in Versace luxury in what You look trying house.

Jimmy off that been XX%. put our as team back strategy. the hat given Michael what new category, digits, that I design increased And really mid-single my extraordinary. in during around footwear And at by up Avenue business associates Kors channel place entire -- and the in in around gain accessories of around the of really we've our XX% well. And to our our I'm course, business I take by to traction has some business in women's own was launch Milan strong Our looked And world. VARENNE, all the collection and starting retail quarter. in That's of the Choo. significant sales they're with our accessories again,

expectations another that we're that. accessories, higher question, is in were. to strategies profitability. So came that develop original margins look are ahead anything so are margins headway higher if anticipated. Kimberly's at where the had you we or in much Versace's for to again, earlier are our don't damage much, of company. what the And of great to tailwind the we in making terms And do again, These than We're years X.X more want And operating getting we're working. that the we business

gross to testament forward. margin gains Jimmy And associates. product, And also, the sales our there some so moving that's real margins as Choo, are making operating the well. again, We're a

the brands. many there's so to season, luxury be we're challenges that. And much. all have will overreact a this some not for focused So we the desire us good our there consumer that, Thank for might to our but of on X the more more to holiday things stay happening very strategies, think yes, try going I you

Operator

with Our Chen Cowen. next question comes from Oliver

Oliver Chen

and Tom, environment. job tough in nice a John

thoughts it full color would love the topic physical well. the the store also On any and that as outlet and impacting just earlier. between I price inflation, your what traffic with is seeing consumer reflected how on traffic, upon you of and you're

John Idol

initiatives And and obviously, you, I really, volumes base to is the our speaks executing On I think, that. really to, think, against responding entire really last a last quarter month that's And XX%. and up was consumer our the to strategic Oliver. is that group constant employee quarter again, do how talented Thank how us. We was currency the an basis, group. want was -- for for acknowledge extraordinary

recognizing appreciate I that. you So

versus -- In I store full I'm Store said, is, price relatively as we're traffic. to And start it's terms seeing a the actually, outlets. traffic traffic the store bit with good. of going stronger in

that what And we're well, mean, And again, it's in we've it's also feel been had would I bodes much we a where that, Japan offset Again, that and feel traffic Southeast in in all, in to confident particular, -- say, so Europe. will some happen less that in channels, good we in China. say North for our in America season. seeing decline own about in good very Japan happen I will holiday still But for I Asia, Australia in to well -- on wanted and what able strong robust. very think And as of balance been China. quite in

year. I America, work they're of terms people And are the and didn't and in commuting a interest rate the going what all we lot to time think North about of costs. they incurring inflation, again that about people concerned they're have in where that back here is some anecdotally more Many from stores this of expenses concerned the In rises. last hear costs those

So whereas hearing a deal great around energy. of in we're that, Europe, we're hearing caution

up been have I'm energy hearing have you, in sure, are Europe. and about, costs substantially read As

And than And little so eye to bit more going I That it of mean slowed would that have our a we going open that. have would closely the doesn't Europe, it's a and we not in keep that But we're down things seen yet. thought bit to consumer haven't later come. was on again, America. in kind think got North

where but of think we're the traveling Europe. major the over I traveling, Europeans you still people Europe. positive seeing also traveling as that with And to are So mainly cities lift Americans robust a Europe are people throughout seeing aware, in traveling are quite

consumer is hopeful, the And in are prices we're as that have well. that cases, eventually knowing energy higher again, and many food higher cautious interest but costs rates, facing So some will impact. we higher

go our this around our open conviction into wide eyes Thank objectives. with staying you, a we So and with Oliver. with remain strategic solid

Operator

question comes next Adrienne from Yih with Our Barclays.

Adrienne Yih

very a accomplishment in great really a tough And environment. Great.

top be it. $XXX total come the wholesale million. to team probably focus there. this The I kudos to believe going to I Tom. on line sales the about is So piece want for of really in

wholesale -- is And primarily Did is from current lowest quarter, it for typically quarter? What from reduction question the Was do? talked what you wholesale. annualized. through then Apologies guess was December it the third that. Kors your if $XXX in the missed it think sellout, million I right in about I quarter? your current a wholesale in fiscal grow? did my I sell flat the piece

wholesale So double-digit what heavy my a if like so. correct, for calculation retail? that good is is season in And that's or at decline XX%

can So if understand those me help great. numbers, that be you would

Tom Edwards

the it. take wholesale walk our into provided At revenue we're back step guidance could beginning original I how guidance now through maybe on billion, Adrienne, our the million challenges we're of mostly year, then we basis, $XXX and $X.X billion. $X.X is in wholesale. and of FX. for point fits difference constant for Sure. of X%. China versus a It's restrictions growing out And FX, now $XXX XX-week a at on and to the million about of XX related of currency I'd year, the really,

Michael wholesale that and million, result teams the be other primarily So guidance, and QX, wholesale the FX of China. even in modestly wholesale our and embedded the controlling challenges, out QX, do With for as half regard year. to we the as and we is is delivering up down they retail break those we are wholesale, $XXX really is of In businesses change guidance, our positive. And for we previous In a very it can. the expected was be million expect Kors. not with looked at while to to what believe this wholesale, $XXX

Now QX, of for And be that it last the repeat I'm not to? we're QX in the related to year, sure down. particularly your expected could you seasons part to if question on as the

Adrienne Yih

Is I the spring, selling retailers ordering it late was placing you're orders for are if wondering, right? So is? that they're so through book, their the for? what Yes. summer? that how December, order Is

John Idol

that for me let you. Adrienne, grab

still the So was we up facing delays wholesale from the one QX, thing. was why slightly were reason because In our inventory in for . group

the And things decision. made slow saw So the last the getting to we begin down for then weeks, were over we as season. really everybody fall few position into we

off. hold just Let's

place Let's that from that's to not try take to the put possibly we've in inventory good going this away done. all

on again, book And work I with of kind it's go-forward say a joint complete a would order closely a partners. the basis, our plan. we very retail of terms In action

just looking up we up that down by us. Y. our X. with sales we're then slowed inventory it's X, And partners retail down trends. flow we and by Business is at work So pretty Y, much by by If

increase approximate in is that wholesale of range. year wholesale how any the side Again, inventory across the on there We'll retail nothing for in the modest Again, pause place see there's things. an would got next things inventory out. from us kind play the we've XX% that a in So of business standpoint. give group

dramatically way one to other. the So really going our inventories impact or it's not

feel feel wholesale going good to how given ourselves the year, end we where positioned today. good about what we've we year. about we're we in and So cautious going into already We took year next channel, the to know next a approach

you us. is key So Margin inventory management is for for very much. us. key Thank

Operator

from comes question next Sachs. Brooke with Our Roach Goldman

Brooke Roach

to follow earlier business your various demographic of you're about some cohorts. within the like seeing across I'd comments up momentum income John, the on that some of the

your to sales and mentioned your context just I in question between outlet stores. season? think you how differences can and holiday traffic you brand a to momentum the any your for in mainline to total prior expectation on translating that's But provide additional through

John Idol

Brooke. Yes. for question, Thank the you

Kors. I the the online. we're And We're with with is reset our believe whole As Michael we're you've now traffic how watching I think customer. that's with I kind and around highest what the there. us very tactics seeing team's Set group I for engaging hope again, the pleased indicated, imagery our across right happening of Jet been

resonating. really that's think I

And to Choo's just Time fall never we campaigns about an and excited Jimmy Dare I very be customer, season. attracting that of customer Kendall think course, Jenner then, we're as that Iris wanting with Again, for about And brand. this part Versace, to excited launched fashion a our there's having of Law. face really a right a We're accessories. in think now shortage There's business, marketing of there just our focused again, hearing, really associates for are the much accessories working. Versace. Versace from excitement our a to and sales younger and around coming And coming on customer customer initiatives the who's we're stores. the around I in

few see ago last starting we're the consistently. and a launch year that It started but had Medusa, La with to X.X haven't about we now years in of Now this years. regularly with

traffic, around that's I in of our And shopping. that, lot e-commerce site. driving So the a think store back then terms in of think I engagement are people

to Hopefully, North holiday I again, America we're And think here we helpful. and a Europe, going question, differentiation the that the still to get levels traffic next so. good you financial And traffic in part I between together. I season. going happen customers' price. in the seeing, Thank well their and shopping in week little in something health people lastly, in And think America and I levels. the speak see that getting I do North interesting can't be Europe. are that but in online that's and weather are cold to and the for Brooke. channel, for better the and or be the we're lists looking would believe bodes outlet in full just what they're think The about

John Idol

we forward keeping being note, year to you how for quarter a you. in again, two put are, to Capri. the Thank We're you we On and joining us brands, And over out Versace we that look will guiding today. Michael in again, Jimmy end strong to the Kors, up very future. to think turned forward speaking everyone would the with the to initiatives We're that that I the we also for look second as And next dedicated say pleased very thank Choo, like company, quarters. and we've place. for our X year very the and very And confident strategic luxury the light.

Capri Holdings Limited (CPRI) 9 Nov 222023 Q2 Earnings call transcript