Earnings call transcript Q3 2023

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Operator

Greetings. Welcome to Capri Holdings Limited Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

now of conference Investor I'll Davis, to time, President Vice Relations. this turn over the Jennifer At Ms. Davis, you may now begin.

Jennifer Davis

call. quarter Good for morning, Executive Chief 'XX Officer, third Financial and and Operating joining you this conference fiscal and us on John are everyone, Capri Holdings Chief and Chairman With me thank Officer, Chief Edwards. morning Idol; Limited Tom

during and call begin, uncertainties may results from the that Investors in on update uncertainties remain operative certain this the we SEC statements Company's and subject are which at actual Company's you to could a in later should available are Company to release let are that that website. remind risks assume the forward-looking cause to constitute those obligation time, undertakes today's no on on call. made call Those me statements, and we described not the which any will filings, Before statements risks press made differ discussed today's information these expect. and

restructuring charges, earnings the reconciliation, other please earlier at capriholdings.com. in noted, implementation information charges, a exclude release website ERP on on will presented non-GAAP be today These the transformation costs, basis. view non-GAAP posted measures and costs, costs financial Capri otherwise impairment charges. view the GAAP To of and war impact corresponding associated with related certain all the on today's COVID-XX-related call our Unless Ukraine, measures

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

John Idol

challenging everyone. than third Jennifer, in was good more the morning, you, performance anticipated. our and Thank Overall, we quarter

pleased all performed our growth our business houses. three own of were retail aspects many well. continued In across our in particular, luxury of channel the However, with we

Michael the is strength powerful and our brands: testament as a to Versace, as strategic well the Jimmy initiatives. of Choo of Kors success iconic This our

the the in disappointed quarter. performance global our were we with However, of wholesale revenue

as cases due to the declined COVID the Additionally, surge in Mainland significantly China country revenue in reopened.

in third Total a to retail Revenue in increased more X% sales turning constant currency. currency. performance quarter in globally detail. decreased X% company constant digits on Now and basis reported mid-single

of versus acquisition added XX database year. key as growth the our million customer was than prior names new New to a more driver we

in own largest channel increase as The growth and in the is desirability large This our of customer as our our the history. database year-over-year retail brands. strength our well growing and demonstrates

our However, channel declined largely XX%, Michael sales wholesale approximately driven by Kors. in

year. build to mix Operating margin well and wholesale, longer-term of and marketing below between increased sales equity. support shift prior growth brand expense This XX.X% retail the was as reflected as

of As earnings our a share result, per expectations. $X.XX were below

Now X%, looking group retail, revenue In in trends our decreased offset at significant with Americas, mid-single-digit revenue third the by declines geography. by wholesale channel. growth in quarter

in currency. X% Southeast constant Mainland decline This Asia, In decreased but nearly results a driven decreased offset by China. revenue, reported strong trends currency. XX% basis, on revenue increased reported in XX% in Asia, a retail EMEA, was strong reflects constant and This X% wholesale. partially revenue In basis offset in on weaker Japan by and a by X% in

X% Moving year. brand. to revenue basis with on XX% quarter Revenue increased to Versace. reported compared prior constant third decreased but currency Starting in trends by a

was with our revenue currency. line were in in operating increased We pleased anticipated revenue China, Mainland XX% Excluding and was constant that than margin expectations. better

traction. Women's with category response were are up performing prior over pleased the which key to a Accessories growth strongest with Goddess of retail product. We to Turning Starting strategy, XX% year. sales the continuing channel in our was our is component Greca pillar, to versus our with which accessories gain

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

expand footwear. of component growth our to is strategy Another

as core stiletto range we Men's by of brand Versace continued curved offerings, of pinpoint luxury and a the metal performed introduction with to characterized Trigreca, gain our Greca driven expanded a styles. authority pumps heel. Odessa the new women's women's our statement and footwear as by collection, well, also a sneakers

awareness desire holiday through gift drama consumer the embodied engagement. and highlighting brand world consumer storytelling. Versace Versace Lily inspired Model continued within and was offerings. Versace's to to campaign of roots arts. Moving the deepen The high deep while theater by powerful holiday McMenamy

Versace's helped continue initiatives we pleased database. Overall, heritage. Versace's our to This strategic performance increase focus initiatives. year-over-year to marketing we Our over Versace of contribute luxury the were on execute with in Italian XX% global an as continue to consumer

the in brand remain as reinforce well potential confident store as fleet. as footwear we growth grow Looking our accessories forward, luxury and house's Versace long-term we significantly codes, renovate

decreased on Choo. in year. X% increased reported prior compared currency to Jimmy constant a X% but basis, Revenue Moving to

Excluding increased XX% Mainland currency. constant China, revenue in

below revenue margin China, anticipated. While was better our than impacted primarily by expectations, operating was

strongest Starting VARENNE category, performing which accessories, up performed key channel our and well. retail in product. Accessories to to styles digits Bon prior Bon Women's Turning Strategy. versus of high sales with with year. are updates our a exceptionally component single iconic the Seasonal our was Go

new people sales enjoyed Maxi. with occasions activities, consumer footwear performed celebrated by special in Diamond driven dress Women's and grew, positive the also holidays. well engage footwear styles as reaction to Sneakers social our

capsule eclectisism launched collection of Timberland's XX generated impressions with iconic million the reimagine as product sell-throughs. Chanel Fashion with York's third community. New its and Sandra media boot. Choo This urban the strong Harlem's of partnered collaboration celebrated Campbell as collaboration to exciting New Timberland. row, social over During dynamic glamour Designer, York across quarter, yellow Native Jimmy Choi successful well The

engagement. brand to consumer turning awareness Now and

Jimmy holiday, the Tree the friends party The the of by London's attendees Lowe. and in approximately energy campaign media. unveiling Posts where season the Choo X was million the Jimmy impressions Law, across XXXX Hotel, generated Sienna Daisy Claridge's designed For celebrities by Iris Choo Tree. house, of and Christmas including Miller our attended social playful celebrated of

This database. we global pleased were glamour. focus helped progress underpin the Choo continue to on with our we our strategic as contribute initiatives. a at on in Choo's increase Our year-over-year marketing to Overall, initiatives consumer Jimmy execute XX% continue Jimmy to

we the codes, significantly in growth long-term reinforce and house's potential our brand as Looking remain expand casual luxury Choo's forward, confident grow accessories Jimmy offering. footwear we

Michael Now turning retail on year. compared to reported Mainland were China. with with basis constant X% currency Revenue sales channel in decreased low constant prior declines Kors. the and We X% own greater pleased a in up despite to growth our in currency single digits continued

retail declined channel. Operating However, approximately as below Kors' due our prior during disappointed the the increased between quarter. marketing wholesale, wholesale as with retail to margin we which well were shift in XX% sales and expenses mix was year Michael

but around the POS channel. in our declined as We mid-teens at sales additional improvement some a result inventory, did with less in we holiday as lag markdowns. trends color which that wholesale, shipped shopping want anticipated the not the at provide Therefore, additional channel in excess during into had revenue we will did materialize. season, sequential end POS up to not To own retail

believe elevating brand channel. particularly working our As product. the strategy we We Kors Michael elevation our you well, is know, been retail and have in own

for Michael brand. We Kors continue to that believe is the the right elevating strategy

drove excitement in featuring with logo hardware. and product. Consumers responded iconic increased our to globally. single Michael Now to collections, accessories, channel in We turning positively updates prints. core Signature seasonal newness own digits retail Signature featuring In sales Kors low and metallic

XX% during the represented Signature result, quarter. accessories a sales of approximately As

footwear. at Looking

significantly incremental can Footwear low delivered to digits we believe to retail in and channel expand sales featuring revenue. as exciting detailing. Michael double hardware branding our continue Kors we elements fashion drive footwear increased We iconic signature

increased about double our strong remain globally, enthusiastic of performing led in retail, categories one opportunity third the strongest the we expand and remains by Men's retail Men's product. accessories sales Signature collection. quarter to digits

sell-throughs. December, capsule create collection. and sporty brand, for a excitement, The Michael glamorous approximately million as as ski well on with luxury Italian In Ellesse, social collaboration collaborated created Kors time and generating XXX second to media impressions a sportswear energy solid

turning to engagement. brand consumer awareness Now and

consumer Kors Michael's infused communication glamour Signature the for glamour season's captured Michael the designs of For Hadid Bella holiday, our jet-set the and joy embodied of chic season. the festivities. optimism, with

He we campaign renowned Asia, in model, the Additionally, Chinese amplified Cong. with

storytelling. of contribute brand. with performance Our third a we helped demonstrating in This our Kors and database, to XX% of the consumer were to year-over-year disappointed the marketing continued global the the quarter. strength in Kors increase Michael desirability initiatives jet-set Michael Overall, underpin

wholesale need to structure. the expense our recognize we lower operating reset revenue, Given

beginning channel. measures by in to to take with the are better revenue We change align operating expenses

can remain jet-set we focused growth. Michael the growth on consumers forward, our We codes. brand driven connections we with to our and initiatives by Looking revenue momentum our growth, leverage to elevate retail reinforce where drive long-term brand channel, future and our own personalized anticipate Kors

to Now fourth looking for ahead Capri Holdings. quarter the

strategic channel, our expect driven by each momentum in We of initiatives. retail continued our brands own

to Due reducing during into channel. quarter, sequential anticipate fourth continued now in POS However, into relative greater third wholesale channel, we we has shipments in the to the decline the quarter. further an are wholesale quarter, performance our third which the this even weakness

half in as normalizing Now turning mid-teens our the total for driven in country we to our channel, with strategic of the by to and decline the digits. the Capri retail strategies as trends in 'XX Holdings. We client-telling China solid In back initiatives, well as fiscal a In personalized fiscal wholesale earnings in own we anticipate revenue growth, recovery mid-single the growth channel, revenue and reopens. anticipate the year. expect

drive sustainable executing initiatives Looking focused to remain forward, on we our strategic future growth.

our and strength value ability equity. the industry, We achieve iconic of portfolio our and powerful margin luxury long-term the confident brands employees three of group strategic strong resilience operating to time the of executing Our our targets initiatives. and remain in talented our enduring revenue brand due to over have the

versatile Versace to of Versace for and to be of call Cedric as as the Officer new President as like Executive the as over Kors I CEO the the EMEA for within XX a group, Cedric proven years, turning our well COO interim currently. of to Kors. fashion leader luxury of our has last himself Before Michael Chief over Wilmotte year Tom, would Michael welcome

brand Cedric's and Michael will and Board, that leadership Kors Michael accelerate The are to strategic initiatives confident help I momentum. further

confident talented of ensures have management team strategic I the place that we execute at initiatives. experienced Importantly, luxury right three we CEOs to our Cedric's now have our appointment in houses. fashion long-term each and am that

call let turn the me over Now Tom. to

Tom Edwards

and performance quarter. were disappointed third Overall, in our Thank in you, the John, morning, good everyone. we

wholesale channel the pleased operating lower our retail margin. were in revenue our declined across resulted deleverage significantly, in in houses, channel with our we three a growth and all which of While expense luxury own continued

revenue $X.X billion Now was expectations. year in prior X% turning Total in revenue below quarter detail. versus X% which and constant currency, third of to more decreased company our

X% at XX% performance in revenue a basis constant on revenue decreased compared year. reported to currency by at Looking prior Versace, but brand, increased

currency. constant digits in Americas decreased decreased a and the XX% currency, XX% China. the in total mid-single Revenue XX% basis in greater reported retail on constant Asia and Revenue increased Global in on sales a in by X%. basis By increased revenue in declines in geography, in currency. EMEA reported Mainland constant driven XX%

revenue Choo, digits basis to a increased Global compared Jimmy in decreased low X% currency. constant currency reported increased but constant retail For X% single prior sales on year. in

on increased declines X% total in and revenue decreased X%. geography, in in a in in on By currency. currency increased basis reported greater China. EMEA Revenue XX% Asia basis Revenue and XX% by a in the Mainland Americas constant constant reported driven XX%

wholesale. Michael revenue decline currency by X% reported basis constant X% At the on Kors, prior to year, in compared decreased a impacted in and the

points penetration Looking low Kors by e-commerce sales in in increase This increasing a prior increased double-digit XXX constant global digits retail currency. sales, primarily was Michael e-commerce driven basis by year. with at channel, versus revenue single

However, XX% year. prior wholesale to declined approximately revenue compared

Sales Turning a declines a decline decreased also to reported reported basis in in by Mainland EMEA the currency, in currency, China. greater X% on driven Americas in by in constant Asia geography. revenue and driven wholesale. X% in XX% decline decreased Revenue a by X% decreased Revenue constant the by Kors on basis driven and Michael wholesale. in XX% in

by XX.X% a looking at points margin of transportation Operating year, price performance. was expanded brand. XX.X% Michael increases margin company the expense inbound XXX by Gross to reflecting to compared several revenue driven total percent and primarily Kors basis as costs, driven factors last moderating mix. XX.X%, Now channel

as has channel low wholesale First, resulted the cost variable wholesale significant in in the deleverage decline revenue structure. a

sales Second, investments variable marketing increased which e-commerce as resulted in third, planned, higher to we group. increased brand-building double activities support costs. across digits, our the And

our year. expectations. Due XX.X% expectations our operating compared last operating XX.X% Choo, of our was in the company year to with to was expense operating margin X.X% of XX.X% last compared X% deleverage, expectations XX.X% below declined margin to total margin At was and and year. Versace, ahead of compared to to Jimmy last At operating and line

our below expectations of And operating compared Michael XX.X% and the to year. margin last Kors was XX.X%

release was Our primarily last deferred quarter to rate due U.K. the tax X.X%, assets. tax allowance rate of the on a for valuation compared to of X% year's

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

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

Looking with XX% the over a at quarter $X.XX increase inventory. the compared year. last represents to sequential deceleration quarter. billion, ended We a This prior

expect We below of end at continue be prior the levels quarter inventory year. the to fourth to

Now turning guidance. to

basis, Looking at the of XX% billion. of total a cautious retail. We more quarter, now environment. decline This we an in reported decline in represents macroeconomic anticipate outlook face a reflecting company revenue a increasingly are fourth uncertain approximately our mid-single-digit in revenue the on $X.XXX of

and down, On further forecast constant basis, be currency down channel are the increase For total planning company in down XX-week but a X%, an approximate mid-single revenue we wholesale, retail had in it revenue digits. the decline. would including an now XX% we planned

retail For by an we approximately forecast decline with low reported fourth in decline Versace basis revenue quarter in XX% single-digit approximate and a brand, of $XXX a This wholesale. XX% a of revenue decline on represents million.

revenue. would On down increase single-digit basis, including retail X%, low a be Versace a constant revenue in currency

in As a the reminder, China be Mainland in lag, will Versace significant reports the in on included one-month a December results. quarter fourth therefore, decline

an a decline XX-week This a we XX% On basis, reported revenue increase revenue. a currency retail including be retail Jimmy Choo, X%, Jimmy a constant would wholesale. single-digit down approximately in For XX% represents forecast in double-digit decline low with $XXX on revenue decline of in million. and a low basis Choo of approximate

For a Michael represents approximate in decline decline X%, revenue down Kors, on be including of On basis, increase million. revenue wholesale. in approximately reported with mid-single-digit currency a constant Kors we forecast retail XX% XX-week This $XXX and revenue. decline Michael a mid-single-digit a basis a in XX% of would an retail

anticipate approximately mix reflects by shift sales We margins. offset operating fourth retail quarter margin of continued at operating due primarily margin expansion, deleverage, the expense looking Now gross X.X%. between This operating wholesale. and to

this across brands. three expect We all

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

Kors, margin For Michael operating negative mid-teens. mid-teens. And Jimmy now for we we the margin operating anticipate the an in Choo, in now expect an

Turning expectations to our expense non-operating of net items. We approximately interest certain forecast around $XX million.

in driven of with well a an of foreign rate negative mix primarily resolution earnings tax by uncertain anticipated lower income expect the benefit approximately as XX%, as tax We tax an jurisdictions. position of

We weighted million. outstanding of average expect shares XXX approximately

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

moment preliminary like Now I share high-level take around a fiscal thoughts would for to expectations to our 'XX.

We material in wholesale this outlook given trends. are change providing the

'XX, anticipate primarily expect $X.X as versus the currently revenue all in 'XX Asia in driven increase growth our fiscal increase by own will a revenue approximately channels We China by retail brands. billion, growth We of fiscal retail X% digits, reopens. double across continued low in driven

initiatives. by mid-single-digit strategic our we Asia, to retail driven increase Excluding the in expect revenue range

channel, taking macroeconomic three of fiscal now the brands, due range. in all XX% of expect the cautious our wholesale from planning in a wholesale decline revenue to the approach approximately mid-teens we our environment. with partners business Together of to will we anticipate are 'XX across penetration XX% 'XX. fiscal In in revenue revenue the to decline uncertain more We to

the revenue, our expenses our need strategic manage structure. make at continuing expenses. Now drive growth. plan also decline expense to We proactively looking to investments, to long-term marketing, anticipated recognize in the particularly wholesale Because to we of in operating reset while

Looking operating margin. at fiscal 'XX

deleverage. expansion, reflecting partially XX.X%, to gross by expansion expense modest offset expect margin We

offset as expense, We rate higher effective largely mid-teens tax share expect by lower an count. interest as the well in

we of EPS approximately $X.XX. a As anticipate result,

expectations and 'XX to of like year. revenue would discuss half earnings fiscal and the cadence our between Now, regarding first of the the second I

Looking at growth own the revenue, throughout in we year. our retail anticipate channel,

will prior half, margin In expect year, the margins declines to the wholesale, the we the of normalizing Relative lower fiscal first the in of this result the significant in half in back as trends expected 'XX, first anniversary year. year, declines expansion of half in 'XX. back in half fiscal in we with with the

brand. by expectations our at Looking

of an $X.XX margin billion the range. anticipate in For approximately Versace, revenue and mid-teens we operating

$XXX For in margin of we $X.X an expect billion for approximately Jimmy Michael of And in the Kors, an single-digit approximately anticipate we and range. range. million operating low margin Choo, revenue XX% and high operating revenue the

Michael we conclusion, are remain our disappointed In Kors. we results about guidance, Jimmy while for third and the potential with long-term Versace, and our Choo quarter fourth quarter optimistic growth

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

up Now, the questions. for open we will line

Operator

with Boss first JPMorgan. our line question proceed your And Instructions] with from comes question. Matthew the Please of [Operator

Matthew Boss

Great.

questions. So John, of maybe couple a

of larger First, that change? if there's maybe then any accessories for difference you to relative do you a that believe in explain best and speak to wholesale to perspective? relates for between it scenario overall direct-to-consumer nearly from covers as category the demand your you're And today, seeing picture, health appropriately macro seeing you're the any you the revenues to could overall how for year been next reset pre-holiday, brand And portfolio?

John Idol

Matt. you, Thank

our are So the quarter mainly we very channel. obviously, third with results, driven disappointed wholesale by

-- think pandemic. at fourth certain we that shut due are with the showed own at retail we exception that points in our point had than have of really pleased, anticipated, the any remarks, we we which had more than channel, globe declines had stores which to China, China in during the the I during prepared reopening. with was as further across quarter during We And the said we strength down said and our did

So seen that in January. there, an business we have difficult. the in was uptick And quite especially

retail communicate in in consumer. growth have history. range. able And grown those you every And own Company's the brands and we our double-digit ever the work single directly the feeling course, largest all to strong how saw good of and where clientele the our growth, So, three of also that in and database at quarter about we've channel the we're with and consistently luxury database we're

I and product the all that's everything in to categories, And had the way that think reacting in we accessories. from marketing the consumer speaks And is of our three to saw strengths the initiatives, brands, of growth itself. you our strategic actual the to the

speaks strength And so the that category. I think, to, of really the

the of houses also I world, strong. is you've with other category that the have from seen many in the other think happened reports luxury

In the we terms issue it, of increases both have in that in of the elevated design the performed this where close although XX% America we of products to is brand, we've of say elevating of average, we're positioning since the been and terms category, and North terms in our of the not what anticipation, Europe in happened and better, more is in started terms to have I'd way a our more pricing. of that's the wholesale on still the been really way marketing up we many quality, the really in a XXXX. Kors Michael issue, up, Pricing -- price

have channel the not year. channel. North of the and particular, the throughout the same has American in that was in We performance rate right season. that holiday rate We pace They the own our pace saw see then I of the consisted up and that afterwards. strong not -- the at think kept Black more not all growth do kind the -- did cautious during consumer stores Friday, wholesale through

thought year, in channel. from performance -- We in had really first the in could was which we we inventories of did the just in shipments. that two as in inventory calendar line where if think had third that thought strong that a were come part get inventory our very the quarters, issue, to get wholesale position, And we better of we that you quarter that an we we our back came consumer. never And was shipped, saw

There are it's is our possibility differently that a the than taken own we've channel increases pricing impacting that channel. that impacting

had our into in up. positive gone of selling the pricing But American is a all pricing. inside we the own channels see our has and the as tiers where our multiple stores. North of put What have both did back European staff we We

see between our and of continued We in those a investment on, staffing delta saw the we level doors. a in -- doors had intend significant that performance it of as said result, especially And once been how wholesale And investment not. fairly in clearly that a part goes. about it positive channel did that staffing own before. doors top-tier those to in there's up. talked that the take We our We we'd

So, we on to invest that. continuing intend in

of impacted at to particular, category category think do say category We department the in in all to channel, store across in continues have the we that Again, grow. terms it demand, was locations. the North America. saw I

happen. uptick, We disappointing. had really that was especially holiday an that expected to did have season, the that So and during unfortunately not

believe reopening of will Again, of Matt, We for think our revenue channel. best look, happening. going retail do retail think channel. opportunity see own that small additional in our the see China, the some in think we That I retail see our is in And rebound. in fulsome particular, particular, gave we travel the will We to channel. to that do what seems terms we're can strength increase Asia, with guidance. very do we in add additional guidance. in we in all And that And own to forecast, provide be consistent do we continue

think comfortable So we're that. I feeling with

be quarters. more we've for, in higher That's slightly year-on-year it offset significantly global the planned which we've first basis. in the into less be flat, where a business half down year, will for QX. decline. planned wholesale quarter of on planned still a really back The next decline or restocking And stack a channel. the again, to we the -- And quarter our to that's quite of and our the were fourth We've year

how conservative levels around said be given group. and that's partners across That's And the might they way, multiple in mid-teens. down concerns the Michael the seeing in in general. wholesale We're not Kors. some just would we've the at be the their area respond more And by consumer our planning in wholesale

taking point of So, very I prudent view. we're think a

going adjust business wholesale then was a in us his we're prepared as with have fixed our The and Tom not for spend lastly, costs And investments does it. associated remarks, of said accordingly. and business our lot to a profitable

So operations, hard at own therefore, adjustments some that make now. at and we'll have our inside work to we're right of

I Versace, brands think Choo three strong with and with incredibly have we So, Jimmy Michael the is us for Kors. takeaway

We with against vision. strategy as we very to business lower to going think stay we're change how be brands, go that given of are believe that costs that our to those and kind these true are went And we're lower strong believe through that the that going associated initiatives to work very very, model through continue And strategic going in that as our I up -- a running we And we'll and business it, solid. accordingly. we're to stay we to worked for us COVID. has this wholesale

very you thank much Matt. So for question, that

Operator

proceed with question ISI. Please the Evercore Saad of from question. next your Omar Our with line is

Warren Cheng

a bit the line the in Cheng is on to pretty guidance. little from just Omar. This on It's XQ for change. the I step down, even big a sales further Warren wanted dig XQ

changed what that just the think retail to clarify, the understand happened three December, all then there if looking for past and you ago? in outlook I December Or But is too? And focusing for months China, wholesale China. also, on the versus I side, So side? coming China we look geographically on all change your on expectations have just did

Tom Edwards

more question. outlook QX, here. and due a inflation to Tom the taken macroeconomic confidence. environment for cautious increasingly Thanks as we've really the also, It's And John consumer mentioned, uncertain impacting for

XX% XX%. and down seen there is China So big year, wholesale prior -- in what a down we've versus step Mainland down for

basis, whole reduction versus quarter. I much the that prior if dollar on absolute So in total, the pretty an our do for year that's

to in next reopening. We do we And opportunity have retail is as China outlook still we expect slight our because grow believe, this they year, change mid-single digits. a are

all away in a restrictions, the taken results. created, had I has pullback the and traffic surge they've near-term as COVID However, cases that think,

Operator

with of Ike with comes Boruchow question proceed Please from line Our question. Wells next the your Fargo.

Ike Boruchow

two could Tom, and hear John, John you just wholesale. you to guys. quick I on good from clarify guess, questions if

you're basically could think wholesale about a said in channel? half. So would because to the of cost If time within do whack out profitability think structure, QX. just But how that being QX down out I good XX% I be? be just the think do of answer the heard your that believe, you on clarify kind it's in flat year, back in Matt, talking And should based first that right, and wholesale from I much then will you declines. half it feel you're of take of you why cost that worse the than of How to perspective forward -- to obviously, align quickly like a little the so it structure will kind take you you that a position next go

Tom Edwards

I'll here. Tom It's those. take Ike. Sure,

down so year, will for So overall, for QX you be year. next XX% mentioned, the as QX, wholesale,

first are and in to quarter. in the first we that's We going more be the restocking to anniversary-ing weighted expect as 'XX, the declines half fiscal

than in quarter wholesale basis. year-over-year first a the quarter more So, the down will on be second

the that hopefully, answers So question. first

we in has wholesale variable terms lower mentioned, And structure. cost aligning as costs, of a then

rigorous And our of business. into guidance. a the for are we have we're and working And driving number to rate areas expenses a to other revenue linked instance, initiatives are so evaluation on embedded also other non-revenue-generating and in all reduce of those recalibrating directly consumer expenses and expenses, and our of reducing that engagement spend not divisions the corporate, across

use particularly to that continue database us going are like That digital e-commerce in allow and and large areas and that in also said, growing we to but marketing, database. we engagement invest, to know drive

John Idol

asked you thing, I why understand And Ike, and clarify I want to one question. the

the of year. So the and in down group we wholesale first across calendar business the half half partners back in of calendar are planning with the at year the retail, channel our

sales, wholesale, retail at at is not this So retail.

POS. it's So

And roughly We flat. the some it's be there are to that, planned exceptions whether business Choo might planning Jimmy slightly. up

year. But the consumer in And we with way of what may total think view there Kors, with prudent that, that that's company, the happen a the terms right the did the how channel in back the add impacting of not we last was terms that's Michael the in thing, half to decline think year. one color. of given back We I the of have high year. decline that too, in might during such half other

we So with in brand performance store had Kors the a Michael in in department XXXX, very the in wholesale, strong the -- calendar retail channel. particular, actually

we So staffing we can't stores, this We put own know cetera. I I think, of in we've are et place, what teams price by our caused speak levels stores connecting we that happen. -- know job But could good doing, said, our was We the with be to have increases the this we a the consumer. very people own in were own as seen where some in in. our where

that you are from purchasing we are have also way, us. way database We those consumers know actually that -- grow and the by saw the when predominantly who

So is usually, us. they the when database from made have a purchase growing,

us shows there's all tremendous three that that So in these interest of brands.

to power not you houses. three But given look call we for at many so And wholesale And step change easy on in we again, of that the it's and continue confident. be people the to strength of know again, these and I the business. this feel going the listening in

have really forward we We're to This faster happened than nimble pivot be anticipated, a around anticipated. quickly little can But little the we've we we because going a to of we and to have move XX% I wanted quickly. business just the would had down think than sales. more to have shown Company wholesale always get

initiatives expect areas quickly. can of rebalancing And relatively and so, I certain to see you to of the around think fruits happen some our costs

Operator

with of proceed question your question. Morgan with Stanley. next Our Alex line from Please is Straton the

Alex Straton

on environment on just the gross the Perhaps in focus appears observations margin expansion guidance you embedded could quite here. a have to have share wanted held to I quarter as as It assumptions your well nicely. forward? in promotional you in going modest the

John Idol

Thank Alex. you,

the a things database of and in the positively. I And the consumer performance showing gross number I retail think margin second, the brands. health first, We think the impacted had was, again, stores; to own our at growth our our response the report better news margin gross our that also. the of

this last through going any year. bit ago the either price it Again, not be price we flow the stopping price the call, we've two increase. And a then of had that calls or the of There's group. first to more told sequential increases. we're increases are in across taking We will you half little

pause. For being, going take a we're the to time

We also and took Jimmy a fairly significant price Choo as well. increases at Versace

it So of our will positively. where And of we margin. have that pricing other the in the part is some right reflecting gross place also now. Tom speak terms a in of think we're in impacted areas that to good is

of next see channel that secondly, you'll in things I little a next more show freight and year. mix. little a you'll will will So benefit. bit year. a of the to And be Again, up think bit some That start see two there the

bigger year that a As to me up retail year. this margin. next show becomes will gross part, also in let But and have speak the Tom

Tom Edwards

similar I'm for QX, trends happy you QX. more it's a Sure. to color and give very on little

with did versus from we the but mix are We increases retail mentioned, benefited price and higher channel ongoing promotional. moderating see still wholesale. future, John a in will stop were inbound freight that not more the We So the as costs.

the a better level or given compared to sales. more last promotional of normalized But did markdown have year, we inventory position

headwinds And some included regional mix. additional

lower it's perspective. as dollar, saying year a is well the several of hurt As margin as on the which stronger over higher we've quarters, us past the has revenue been Asia a through a percentage margin and

the retail as larger But next at be business. look we will of a year, portion

tailwind, China, on of in years, brands. brands, margin our all initiatives past be rebound across which addition the gross well. in improvements over freight will This a several is which, and our our a strategic the have significant driven brands, expect We in to as

a in in And half, the will half, those because wholesale, the to with shine that headwind John it's going cost be first variable as mentioned, areas normalize we base. other But as deleverage through. low of back

John Idol

the or be will should a less add back We're headwind it time get normalized two quarters. And next to first also will a that very then year, we year. a might it normalize. the minor feel or that But half of by we still the be or in tailwind. I the to just headwind more FX be not expecting a probably it tailwind

significant of performance a noise start you, come some it's headwind will hopefully, as to been of the us you And know, this Alex. So out numbers. that for year. Thank

Operator

Brooke Sachs. from with Roach Goldman coming line is of the question next The

Brooke Roach

sell-through database. pricing talk Is explanation or or can architecture? cohorts weakness more you're you there Along may additional your tiers trends you've repeat be John, you activity you're income I the versus retail in any and your you few what acquired know those mentioned of own from difference years business driving a priced be America? sensitive? the particularly potential price North mainline wholesale. seeing product momentum Separately, over to in nice various that in were growth within consumer that of cohorts as had lines, could that in your Can trends about last customer that the outlet purchase your demographic talked stores, across sell-out business seeing in

John Idol

Brooke, in this overall the so -- not database there's demographic lot good we've a with actually dealing we brand? very more which sign. any been been fairly the the also, hasn't consumer? and the what's higher-income income is it and our five, last over case. database. And is a towards the driven and be database, years, in think interesting we has a yesterday, seven to about Brooke. we're that income the Michael lower Thank still a particular, you, does the six, and this still we're more with And high a Michael equity -- did Where Kors consumer Kors, far, lose concern, brand And consumer reviewed changed

between the as e-commerce we have the anticipate. our is is interesting between crossover to and stores, while not crossover also we as channels, great What's continued do

for probably is news through good it's coming database of and the the our -- the consistent is So customers. cannibalizing store group, channel. and across growth, XX% not pretty us the It's e-commerce

that's healthy very mix. think a we So

all make can of our really part be distinct standpoint to were we brands our And to share mind we would also a through. we very to their that shining mentioned, our competitive three see, activities be marketing quarter. on many decision And our sure Europe thought accelerated accelerating our that and a had as from that that the you significantly of in Tom knew was houses during America across And do competitors North spend. We that.

so able of news for to that's data seen to, transact that, existing good because a And are acceleration little through tactics, sizable those in and databases. our coming bit is going been getting year. get these direct-to-consumer certain the customers be repeat And ways, marketing We've able some lapsed to on us our really mine to so consumers that databases analytics more next inside. with we've down we're an the And repeat costs be may regularly.

strong North to invest, competitive as year, we create we in leverage feel three databases that as initiatives an the to the who overall next houses brand to to European have at can the all leverage American And companies of think luxury group. size again us there of opportunity again, competitors very some said, We the for that. of one we're as with marketing Tom is So the the important start and the given going in that's across most be still well how statements.

that, going to our invest we're going lastly, we invest to then in have think stores, that to to continue a et and place initiatives, we're we us, that, time next continue for across but over to up renovations, that really going very Brooke. years. part a group. the going our you to step in And our very cetera. the important clienteling of So it's, two where that's get advantage to take Thank more It's much, competitive feel a us again, to to strategy be we

Operator

from The of Paul next Citigroup. the question. with proceed is question with your Lejuez line Please

Paul Lejuez

transactions DTC you for Curious half forward. what you first within assumption the in and quarter quick couple of flow that and expect ticket of going if versus F ones. or the business the free in 'XX just 'XX. about a saw then cash Just you Then assumption can second China, the talk half

John Idol

change really UPTs. Paul, thank we lot in of you. a or didn't see Paul, transaction

would of saw smaller return I wasn't result did an really bodies, cross bags. in needing a that to to say, we that more small a in issue saw the much was selling during of people So of things a where -- leather us. group, the ticket, shift see small for that bags. over across -- smaller to and lot And decline a more larger put bags COVID, We a benefited, We to there more larger we goods. were was where

increase and was units was category, leather down, but of we seen people in And actual that think, was dressing our slightly very a more of transaction the really so, that going which business, a our out and cross -- classify in reflected, small not enjoying the up. because we've I double-digit goods actual price -- holidays, retail down, and bodies parting,

by unit turn that so higher category the actual than cash and I'll a Tom. slightly retail to consumer lean-in And driven were into the sales by product. flow performance, that's of over

Tom Edwards

and cash about XXX to to comment year, above last our flow but free just this regard year. of approximately We're flow, asked With that. year-to-date, Sure. on cash at QX you was even

anticipate flows, strength of brands. flow cash that similar incredibly Company, been that we'll cash a has the quarter. strong we had have strong next that cash an would across free We So our flows generating year always we're

a extremely And remarks, strong. is solid prepared We $X.XX sheet balance very ratio our my is in our noted low. billion. of leverage and debt And net

strength to return So purchase of our flow, and we to and balance feel shares very our both using and cash to that sheet comfortable the with we're redeploy shareholders. cash

at So pay time we returning over number done have managed which when the down priorities, very invest debt, capital look we two then still shareholders allocation one, remains and business; to cash carefully. our in number and

at to an it 'XX, fiscal expect regards And we into grow to the retail. outsized as compared to of overall growth rate China

we of we remainder that, world. expect excluding and up the to China think had the mainly Asia, driven, the mentioned reflecting be by up across digits business, first, I retail digits mid-single double

Operator

next proceed with the BMO question Markets. Capital line from with Our Please is your Siegel question. Simeon of

Simeon Siegel

how think it. how think I wholesale So having and stores' through be big you trying the apologize margins revenues. fixed wholesale point Michael on and to just John, department inventory? more think opinion on an might domestic consumer Kors' pressure are I a through it their whether broader if the to And little of thinking hear you then might missed on love long lower demand you from point if traffic your to to store versus margins we'd the about attempt industry just reduce own Tom, thinking decremental the EBIT the it weakness costs pre-pandemic and last? is earlier can, the about versus help how any But I

John Idol

Europe, one, have want and in that say partners. terrific both number been Simeon, I North in America to partners, our

So And the filling year, the we pandemic. -- had worked very pandemic stores. last we and the closely tremendous together all needs of inventory department difficulties the calendar of first half this the of through exiting

to said holiday actually with in out I you, as we had depleted of inventories. calendar a season XXXX, And we coming strong channel, were that very and

change August didn't so And any the this inventory to up almost type in terms year. inventories step until channels. did of retail caught see got get in a The retail. significant of at really past not we of We

in hopeful. conversion additional the some very in we with said, didn't stores, And prices can't were, specifically our whether for not. know I and But deliver the biggest it. we being in did I just our with it the well as staffing just or run of the see channel category But category tests obviously, we And was us. accessories which we worked channel. the the didn't tell that part consumer

going continue seen as to or don't said, whether is through continuing weakness, I've January. I this a We've know not.

get continue the to step. So to and the think going We the again, additional do -- meant prudent preserving if to shipment we hard suffer not markdowns, declines very ourselves channel we've cause brand, erosion. we've put the to I think said if We've too that. And we're declines taken, that and we this inventory do a worked into cause to point. to want which brand inventory would will wholesale

we're on March see Michael We've track with at We elevating Los in XX know on California, Kors. fashion here announced on in the I things Angeles. right right We know you're very happen our out Versace. think momentarily. that And we're to some with show going the track Versace powerful

he's Our at incredible new some work, strides making CEO, and is Donatella. Emmanuel hard with Gintzburger, along

looks think we're marketing-wise. And where step like, a what to going real you're change terms see in the going I product of

that what's So out the happening been season. we're trajectory the have And Choo fact, in during do call strong Jimmy on has pretty extremely did And year. Jimmy a about through retail to Choo a good holiday performance enthusiastic need there. very I

quite these year But on down, our excessive frankly, and stores. conservative partners inventory. going being be to about a markdowns very to we're our where concerned are And step -- next have don't change We is we're taken has on the okay with in consumer performance with want even that.

We think up. wrong that's the for place us to end

have to on. we be focused So,

a to to believe are If and to management committed got health, team long-term luxury committed in our you're and you've going then company to what ourselves strategy brand And that. stay think your is. I

over it to turn I'll Tom. So

Tom Edwards

range Michael long adjust continue that, already we term, a in we've mid-XX% margin in cost Kors margin the And And base. term, the there's the to regard Simeon, begun step change we definitely brand. wholesale and will structure revenue. goal to Michael to Kors cost Near believe for address rebalance with to operating our the operating

initiatives, with the first we the larger our the tailwinds, Asia the on as look growth we again, in mentioned, will the half, mix, will declines at deleverage. initiatives, path. But get As freight wholesale retail, of along that they create as portion recover back 'XX, in and then little a I becoming China us believe, and strategic

you, Simeon. Thank

Simeon Siegel

Best year. rest the luck the of for

John Idol

quarter for believe joining thank in call Again, of and fourth the three our our strength results said, the third like our this the quarter. being luxury guidance our morning. for we everyone are in That very we I'd for houses. disappointed to

to three We each we on to type a the embrace That that we the fiscal that support believe and believe phenomenal that year go-forward 'XX good plan of very the basis. for a expect in growth have these will and of we strength future. will we return continue of brands,

you and you you. we Thank your support, updated. for very keeping So, to thank look forward much

Operator

conference. will This conclude today's

participation. may you this your You your Thank at for time. lines disconnect

Capri Holdings Limited (CPRI) 8 Feb 232023 Q3 Earnings call transcript